Are apparent findings of nonlinearity due to structural instability in economic time series?
AbstractMany modeling issues and policy debates in macroeconomics depend on whether macroeconomic times series are best characterized as linear or nonlinear. If departures from linearity exist, it is important to know whether these are endogenously generated (as in, for example, a threshold autoregressive model) or whether they merely reflect changing structure over time. We advocate a Bayesian approach and show how such an approach can be implemented in practice. An empirical exercise involving several macroeconomic time series shows that apparent findings of threshold-type nonlinearities could be due to structural instability.
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Bibliographic InfoPaper provided by Federal Reserve Bank of New York in its series Staff Reports with number 59.
Date of creation: 1999
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Other versions of this item:
- Gary Koop & Simon M. Potter, 2001. "Are apparent findings of nonlinearity due to structural instability in economic time series?," Econometrics Journal, Royal Economic Society, Royal Economic Society, vol. 4(1), pages 38.
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