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A comparison of the forecast performance of Markov-switching and threshold autoregressive models of US GNP

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  • MICHAEL P. CLEMENTS
  • HANS-MARTIN KROLZIG

Abstract

While there has been a great deal of interest in the modelling of non-linearities in economic time series, there is no clear consensus regarding the forecasting abilities of non-linear time-series models. We evaluate the performance of two leading non-linear models in forecasting post-war US GNP, the self-exciting threshold autoregressive model and the Markov-switching autoregressive model. Two methods of analysis are employed: an empirical forecast accuracy comparison of the two models, and a Monte Carlo study. The latter allows us to control for factors that may otherwise undermine the performance of the non-linear models.

Suggested Citation

  • Michael P. Clements & Hans-Martin Krolzig, 1998. "A comparison of the forecast performance of Markov-switching and threshold autoregressive models of US GNP," Econometrics Journal, Royal Economic Society, vol. 1(Conferenc), pages 47-75.
  • Handle: RePEc:ect:emjrnl:v:1:y:1998:i:conferenceissue:p:c47-c75
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