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Threshold Integrated Moving Average Models (Does Size Matter? Maybe So)

Author

Listed:
  • Oscar Martin
  • Jesus Gonzalo

Abstract

The aim of this paper is to identify permanent and transitory shocks. This identification is done according to the size of the shocks or the size of some other important economic variable. In order to be able to carry this identification scheme on, we introduce a new class of threshold models: threshold integrated moving average models (TIMA). These are integrated models with a threshold structure in the moving average part. In one of the regimes the moving average has a unit root and in the other an invertible one. The former regime corresponds to transitory shocks, while the latter corresponds to permanent shocks. The paper analyzes the impulse response function generated by TIMA models and their invertibility. Consistency and asymptotic normality of least squares estimators are established and hypothesis tests for TIMA models are developed. The paper concludes with an application to exchange rates and stock market prices

Suggested Citation

  • Oscar Martin & Jesus Gonzalo, 2004. "Threshold Integrated Moving Average Models (Does Size Matter? Maybe So)," Econometric Society 2004 North American Winter Meetings 145, Econometric Society.
    • Handle: RePEc:ecm:nawm04:145
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    Cited by:

    1. Gonzalo, Jesus & Martinez, Oscar, 2006. "Large shocks vs. small shocks. (Or does size matter? May be so.)," Journal of Econometrics, Elsevier, vol. 135(1-2), pages 311-347.
    2. Catherine Bruneau & Amine Lahiani, 2006. "Estimation d'un modèle TIMA avec asymétrie contemporaine par inférence indirecte," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 142(IV), pages 479-500, December.
    3. Catherine Bruneau & Amine Lahiani, 2006. "Estimation d'un modèle TIMA avec asymétrie contemporaine par inférence indirecte," Working Papers hal-04138874, HAL.
    4. González Gómez, Andrés, 2004. "A smooth permanent surge process," SSE/EFI Working Paper Series in Economics and Finance 572, Stockholm School of Economics.

    More about this item

    Keywords

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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