Forecast performance of nonlinear error-correction models with multiple regimes
AbstractIn this paper we investigate the forecast performance of nonlinear error-correction models with regime switching. In particular, we focus on threshold and Markov switching error-correction models, where adjustment towards long-run equilibrium is nonlinear and discontinuous. Our simulation study reveals that the gains from using a correctly specified nonlinear model can be considerable, especially if disequilibrium adjustment is strong and|or the magnitude of parameter changes is relatively large. Copyright © 2005 John Wiley & Sons, Ltd.
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Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Journal of Forecasting.
Volume (Year): 24 (2005)
Issue (Month): 2 ()
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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966
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- repec:hal:journl:halshs-00658540 is not listed on IDEAS
- Teräsvirta, Timo, 2005.
"Forecasting economic variables with nonlinear models,"
Working Paper Series in Economics and Finance
598, Stockholm School of Economics, revised 29 Dec 2005.
- Terasvirta, Timo, 2006. "Forecasting economic variables with nonlinear models," Handbook of Economic Forecasting, Elsevier.
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