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Modelling autoregressive processes with a shifting mean

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  • Timo Terasvirta

    ()

  • Andrés González

    ()

Abstract

This paper contains a nonlinear, nonstationary autoregressive model whose intercept changes deterministically over time. The intercept is a flexible function of time, and its construction bears some resemblance to neural network models. A modelling technique, modified from one for single hidden-layer neural network models, is developed for specification and estimation of the model. Its performance is investigated by simulation and further illustrated by two applications to macroeconomic time series.

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Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 420.

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Handle: RePEc:bdr:borrec:420

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Keywords: deterministic shift; nonlinear autoregression; nonstationarity; nonlinear trend; structural change Classification JEL: C22; C52.;

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Cited by:
  1. Cushman, David O. & Michael, Nils, 2011. "Nonlinear trends in real exchange rates: A panel unit root test approach," Journal of International Money and Finance, Elsevier, vol. 30(8), pages 1619-1637.
  2. Anders Bredahl Kock & Timo Teräsvirta, 2010. "Forecasting with nonlinear time series models," CREATES Research Papers 2010-01, School of Economics and Management, University of Aarhus.
  3. Enders, Walter & Holt, Matthew T., 2011. "Breaks, bubbles, booms, and busts: the evolution of primary commodity price fundamentals," MPRA Paper 31461, University Library of Munich, Germany.
  4. Baillie, Richard T. & Morana, Claudio, 2009. "Modelling long memory and structural breaks in conditional variances: An adaptive FIGARCH approach," Journal of Economic Dynamics and Control, Elsevier, vol. 33(8), pages 1577-1592, August.
  5. Håvard Hungnes, 2012. "Testing for co-non-linearity," Discussion Papers 699, Research Department of Statistics Norway.
  6. Strikholm, Birgit, 2006. "Determining the number of breaks in a piecewise linear regression model," Working Paper Series in Economics and Finance 648, Stockholm School of Economics.
  7. Andrés González & Kirstin Hubrich & Timo Teräsvirta, 2009. "Forecasting inflation with gradual regime shifts and exogenous information," CREATES Research Papers 2009-03, School of Economics and Management, University of Aarhus.
  8. Matthew T. Holt & Timo Teräsvirta, 2012. "Global Hemispheric Temperature Trends and Co–Shifting: A Shifting Mean Vector Autoregressive Analysis," CREATES Research Papers 2012-54, School of Economics and Management, University of Aarhus.

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