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Multivariate contemporaneous threshold autoregressive models

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  • Michael J. Dueker
  • Zacharias Psaradakis
  • Martin Sola
  • Fabio Spagnolo

Abstract

In this paper we propose a contemporaneous threshold multivariate smooth transition autoregressive (C-MSTAR) model in which the regime weights depend on the ex ante probabilities that latent regime-specific variables exceed certain threshold values. The model is a multivariate generalization of the contemporaneous threshold autoregressive model introduced by Dueker et al. (2007). A key feature of the model is that the transition function depends on all the parameters of the model as well as on the data. The stability and distributional properties of the proposed model are investigated. The C-MSTAR model is also used to examine the relationship between US stock prices and interest rates.

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2007-019.

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Date of creation: 2007
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Handle: RePEc:fip:fedlwp:2007-019

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Keywords: Time-series analysis ; Capital assets pricing model;

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