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Threshold Integrated Moving Average Models (Does Size Matter? Maybe So)

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  • Oscar Martin
  • Jesus Gonzalo

Abstract

The aim of this paper is to identify permanent and transitory shocks. This identification is done according to the size of the shocks or the size of some other important economic variable. In order to be able to carry this identification scheme on, we introduce a new class of threshold models: threshold integrated moving average models (TIMA). These are integrated models with a threshold structure in the moving average part. In one of the regimes the moving average has a unit root and in the other an invertible one. The former regime corresponds to transitory shocks, while the latter corresponds to permanent shocks. The paper analyzes the impulse response function generated by TIMA models and their invertibility. Consistency and asymptotic normality of least squares estimators are established and hypothesis tests for TIMA models are developed. The paper concludes with an application to exchange rates and stock market prices

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society 2004 North American Winter Meetings with number 145.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nawm04:145

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Keywords: Asymmetries; Movong Average Models; Permanent Shock; Persistence; Threshold Models; Transitory Shock.;

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Cited by:
  1. Gonzalo, Jesus & Martinez, Oscar, 2006. "Large shocks vs. small shocks. (Or does size matter? May be so.)," Journal of Econometrics, Elsevier, vol. 135(1-2), pages 311-347.
  2. González Gómez, Andrés, 2004. "A smooth permanent surge process," Working Paper Series in Economics and Finance 572, Stockholm School of Economics.
  3. Catherine Bruneau & Amine Lahiani, 2006. "Estimation d'un modèle TIMA avec asymétrie contemporaine par inférence indirecte," EconomiX Working Papers 2006-17, University of Paris West - Nanterre la Défense, EconomiX.

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