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Asymmetric and Common Abssorbtion of Shocks in Nonlinear Autoregressive Models

Author

Listed:
  • Boswijk, H.P.

    (Universiteit van Amsterdam)

  • van Dijk, D.
  • Franses, P.H.

Abstract

A key feature of many nonlinear time series models is that they allow for the possibility that the model structure experiences changes, depending on for example the state of the economy or of the financial market. A common property of these models is that it generally is not possible to fully understand the structure of the model by considering the estimated values of the model parameters only. Put differently, it often is difficult to interpret a specific nonlinear model. To shed light on the characteristics of a nonlinear model it can then be useful to consider the effect of shocks on the future patterns of a time series variable. Most interest in such impulse response analysis has concentrated on measuring the persistence of shocks, or the magnitude of the (ultimate) effect of shocks. Interestingly, far less attention has been given to measuring the speed at which this final effect is attained, that is, how fast shocks are 'absorbed' by a time series. In this paper we develop and implement a framework that can be used to assess the absorption rate of shocks in nonlinear models. The current-depth-of-recession model of Beaudry and Koop (1993), the floor-and-ceiling model of Pesaran and Potter (1997) and a multivariate STAR model are used to illustrate the various concepts.
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Suggested Citation

  • Boswijk, H.P. & van Dijk, D. & Franses, P.H., 2000. "Asymmetric and Common Abssorbtion of Shocks in Nonlinear Autoregressive Models," CeNDEF Working Papers 00-10, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    • Handle: RePEc:ams:ndfwpp:00-10
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    1. Ubilava, David, 2014. "The ENSO Effect on World Wheat Market Dynamics: Smooth Transitions in Asymmetric Price Transmission," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170223, Agricultural and Applied Economics Association.
    2. repec:lan:wpaper:2623 is not listed on IDEAS
    3. Gabreyohannes, Emmanuel, 2010. "A nonlinear approach to modelling the residential electricity consumption in Ethiopia," Energy Economics, Elsevier, vol. 32(3), pages 515-523, May.
    4. Baghli Mustapha, 2005. "Nonlinear Error-Correction Models for the FF/DM Rate," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 9(1), pages 1-43, March.
    5. Olan T. Henry & Nilss Olekalns & Kalvinder Shields, 2004. "Time Variation And Asymmetry In The World Price Of Covariance Risk: The Implications For International Diversification," Department of Economics - Working Papers Series 907, The University of Melbourne.
    6. Galvão, Ana Beatriz C., 2003. "Multivariate Threshold Models: TVARs and TVECMs," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 23(1), May.
    7. Ólan T. Henry & Nilss Olekalns & Kalvinder K. Shields, 2013. "Quantifying time variation and asymmetry in measures of covariance risk: a simulation approach," Chapters, in: Adrian R. Bell & Chris Brooks & Marcel Prokopczuk (ed.), Handbook of Research Methods and Applications in Empirical Finance, chapter 18, pages 457-476, Edward Elgar Publishing.
    8. Ubilava, David, 2017. "The ENSO Effect and Asymmetries in Wheat Price Dynamics," World Development, Elsevier, vol. 96(C), pages 490-502.
    9. repec:lan:wpaper:2402 is not listed on IDEAS
    10. I Paya & D Peel, 2005. "A new analysis of the determinants of the real dollar-sterling exchange rate: 1871-1994," Working Papers 565953, Lancaster University Management School, Economics Department.
    11. David A. Peel & Ivan Paya, 2006. "Temporal aggregation of an ESTAR process: some implications for purchasing power parity adjustment," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(5), pages 655-668.
    12. Hassan Belkacem Ghassan & Mohammed Souissi & Mohammed Kbiri Alaoui, 2009. "An Alternative Identification of the Economic Shocks in SVAR Models," Economics Bulletin, AccessEcon, vol. 29(2), pages 1019-1026.
    13. Adrian R. Bell & Chris Brooks & Marcel Prokopczuk (ed.), 2013. "Handbook of Research Methods and Applications in Empirical Finance," Books, Edward Elgar Publishing, number 14545.
    14. van Dijk, Dick & Franses, Philip Hans & Paap, Richard, 2002. "A nonlinear long memory model, with an application to US unemployment," Journal of Econometrics, Elsevier, vol. 110(2), pages 135-165, October.
    15. repec:lan:wpaper:2481 is not listed on IDEAS
    16. repec:lan:wpaper:2400 is not listed on IDEAS

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