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Threshold Models for Trended Time Series

  • Kapetanios, G.

This paper presents the theoretical development of new threshold autoregressive models based on trended time series. The theoretical arguments underlying the models are outlined and a nonlinear economic model is used to derive the specification of the empirical econometric models. Estimation and testing issues are considered and analysed. Additionally, the models are applied to the empirical investigation of US GDP. The results are encouraging and warrant further research.

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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/wp9905.pdf
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Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 9905.

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Date of creation: Jan 1999
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Handle: RePEc:cam:camdae:9905
Contact details of provider: Web page: http://www.econ.cam.ac.uk/index.htm

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  1. Emery, Kenneth M. & Koenig, Evan F., 1992. "Forecasting turning points : Is a two-state characterization of the business cycle appropriate?," Economics Letters, Elsevier, vol. 39(4), pages 431-435, August.
  2. Sichel, Daniel E, 1989. "Are Business Cycles Asymmetric? A Correction," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1255-60, October.
  3. Boldin Michael D., 1996. "A Check on the Robustness of Hamilton's Markov Switching Model Approach to the Economic Analysis of the Business Cycle," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 1(1), pages 1-14, April.
  4. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-44, January.
  5. Arden, R. & Holly, S. & Turner, P., 1997. "The Asymmetric Adjustment of Prices: Theory and Evidence from UK Manufacturing," Cambridge Working Papers in Economics 9715, Faculty of Economics, University of Cambridge.
  6. Hansen, Bruce E, 1992. "The Likelihood Ratio Test under Nonstandard Conditions: Testing the Markov Switching Model of GNP," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages S61-82, Suppl. De.
  7. Donald W.K. Andrews & Werner Ploberger, 1992. "Optimal Tests When a Nuisance Parameter Is Present Only Under the Alternative," Cowles Foundation Discussion Papers 1015, Cowles Foundation for Research in Economics, Yale University.
  8. Canova, Fabio, 1994. "Detrending and turning points," European Economic Review, Elsevier, vol. 38(3-4), pages 614-623, April.
  9. Pesaran, M.H. & Timmermann, A., 1990. "A Simple, Non-Parametric Test Of Predictive Performance," Cambridge Working Papers in Economics 9021, Faculty of Economics, University of Cambridge.
  10. Beaudry, Paul & Koop, Gary, 1993. "Do recessions permanently change output?," Journal of Monetary Economics, Elsevier, vol. 31(2), pages 149-163, April.
  11. Godfrey, Leslie G, 1978. "Testing against General Autoregressive and Moving Average Error Models When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1293-1301, November.
  12. Terasvirta, T & Anderson, H M, 1992. "Characterizing Nonlinearities in Business Cycles Using Smooth Transition Autoregressive Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages S119-36, Suppl. De.
  13. Robert B. Davies, 2002. "Hypothesis testing when a nuisance parameter is present only under the alternative: Linear model case," Biometrika, Biometrika Trust, vol. 89(2), pages 484-489, June.
  14. Clements, Michael P & Smith, Jeremy, 1999. "A Monte Carlo Study of the Forecasting Performance of Empirical SETAR Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(2), pages 123-41, March-Apr.
  15. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
  16. Pesaran, M. Hashem & Potter, Simon M., 1997. "A floor and ceiling model of US output," Journal of Economic Dynamics and Control, Elsevier, vol. 21(4-5), pages 661-695, May.
  17. Neftci, Salih N, 1984. "Are Economic Time Series Asymmetric over the Business Cycle?," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 307-28, April.
  18. Kapetanios, G., 1999. "Model Selection in Threshold Models," Cambridge Working Papers in Economics 9906, Faculty of Economics, University of Cambridge.
  19. Simon M. Potter, 1993. "A Nonlinear Approach to U.S. GNP," UCLA Economics Working Papers 693, UCLA Department of Economics.
  20. Granger, C W J & Lee, T H, 1989. "Investigation of Production, Sales and Inventory Relationships Using Multicointegration and Non-symmetric Error Correction Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(S), pages S145-59, Supplemen.
  21. Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 231-47, July-Sept.
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