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Multivariate Time-Series Analysis With Categorical and Continuous Variables in an Lstr Model

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  • Ginger M. Davis
  • Katherine B. Ensor
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    Abstract

    We develop a methodology for multivariate time-series analysis when our time-series has components that are both continuous and categorical. Our specific contribution is a logistic smooth-transition regression (LSTR) model, the transition variable of which is related to a categorical time-series (LSTR-C). This methodology is necessary for series that exhibit nonlinear behaviour dependent on a categorical time-series. The estimation procedure is investigated both with simulation and an economic time-series. We obtain superior or equivalent model fits as compared with another smooth-transition regression model. Furthermore, even when the nonlinear behaviour of the time-series is dependent on a continuous time-series, we propose a simplification of the modelling process, which is the automatic formulation of the transition variable from the categorical time-series. We are able to capture this nonlinear dependence on a continuous time-series by using regression theory for categorical time-series. Copyright 2007 The Authors Journal compilation 2007 Blackwell Publishing Ltd.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Time Series Analysis.

    Volume (Year): 28 (2007)
    Issue (Month): 6 (November)
    Pages: 867-885

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    Handle: RePEc:bla:jtsera:v:28:y:2007:i:6:p:867-885

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    1. Fokianos, Konstantinos & Kedem, Benjamin, 1998. "Prediction and Classification of Non-stationary Categorical Time Series," Journal of Multivariate Analysis, Elsevier, Elsevier, vol. 67(2), pages 277-296, November.
    2. Philip Rothman, 1998. "Forecasting Asymmetric Unemployment Rates," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 164-168, February.
    3. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, Econometric Society, vol. 57(2), pages 357-84, March.
    4. J. Durbin & S. J. Koopman, 2000. "Time series analysis of non-Gaussian observations based on state space models from both classical and Bayesian perspectives," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 62(1), pages 3-56.
    5. Koop, Gary & Potter, Simon M, 1999. "Dynamic Asymmetries in U.S. Unemployment," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 17(3), pages 298-312, July.
    6. Mehmet Caner & Bruce E. Hansen, 2001. "Threshold Autoregression with a Unit Root," Econometrica, Econometric Society, Econometric Society, vol. 69(6), pages 1555-1596, November.
    7. van Dijk, Dick & Teräsvirta, Timo & Franses, Philip Hans, 2000. "Smooth Transition Autoregressive Models - A Survey of Recent Developments," Working Paper Series in Economics and Finance 380, Stockholm School of Economics, revised 17 Jan 2001.
    8. Brannas, K. & Ohlsson, H., 1995. "Asymmetric Cycles and Temporal Aggregation," Papers, Uppsala - Working Paper Series 1995-11, Uppsala - Working Paper Series.
    9. Stephen Godfeld & Richard Quandt, 1973. "The Estimation Of Structural Shifts By Switching Regressions," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 2, number 4, pages 473-483 National Bureau of Economic Research, Inc.
    10. Granger, Clive W. J. & Terasvirta, Timo, 1993. "Modelling Non-Linear Economic Relationships," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198773207, October.
    11. Bianchi, Marco & Zoega, Gylfi, 1995. "Unemployment Persistence : Does the Size of the Shock Matter ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 1995014, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    12. Skalin, Joakim & Ter svirta, Timo, 2002. "Modeling Asymmetries And Moving Equilibria In Unemployment Rates," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 6(02), pages 202-241, April.
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