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Investigating Nonlinearity: A Note on the Implementation of Hamilton's Methodology

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  • D. Bond
  • M. Harrison
  • E.J. O'Brien

Abstract

In this paper we give an account of the new approach to nonlinear econometric modelling proposed by Hamilton (2001) and briefly describe some of the methods of nonlinear optimization that may be used in the Gauss computer program provided by Hamilton for the implementation of his methodology. The performance of this program is investigated using data relating to Hamilton's example concerning the US Phillips curve, two versions of the Gauss software and a range of alternative numerical optimization options and values for the important Gauss parameter _oprteps. Finally, the effects of changes in the sample data on the results produced by Hamilton's procedure are explored. The results presented suggest some clear conclusions, which will be of value to those contemplating working with Hamilton's new method.

Suggested Citation

  • D. Bond & M. Harrison & E.J. O'Brien, 2003. "Investigating Nonlinearity: A Note on the Implementation of Hamilton's Methodology," Trinity Economics Papers 200312, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduee:200312
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    File URL: http://www.tcd.ie/Economics/TEP/2003_papers/tepno12MH23.PDF
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    References listed on IDEAS

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    1. Hamilton, James D, 2001. "A Parametric Approach to Flexible Nonlinear Inference," Econometrica, Econometric Society, vol. 69(3), pages 537-573, May.
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    Cited by:

    1. Pablo Gonzalez & Mauricio Tejada, 2006. "No linealidades en la regla de política monetaria del Banco Central de Chile: una evidencia empírica," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 21(1), pages 81-115, July.
    2. Bond Derek & Harrison Michael J. & O'Brien Edward J., 2005. "Investigating Nonlinearity: A Note on the Estimation of Hamilton's Random Field Regression Model," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 9(3), pages 1-43, September.
    3. repec:tcd:wpaper:tep4 is not listed on IDEAS

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