An Econometric Analysis Of Some Models For Constructed Binary Time Series
Macroeconometric and fi?nancial researchers often use secondary or constructed binary random variables that differ in terms of their sta- tistical properties from the primary random variables used in micro- econometric studies. One important difference between primary and secondary binary variables is that, while the former are, in many in- stances, independently distributed (i.d.), the latter are rarely i.d. We show how popular rules for constructing the binary states interact with the stochastic processes for of the variables they are constructed from, so that the binary states need to be treated as Markov processes. Consequently, one needs to recognize this when performing analyses with the binary variables, and it is not valid to adopt a model like sta- tic Probit which fails to recognize such dependence. Moreover, these binary variables are often censored, in that they are constructed in such a way as to result in sequences of them possessing the same sign. Such censoring imposes restrictions upon the DGP of the binary states and it creates difficulties if one tries to utilize a dynamic Probit model with them. Given this we describe methods for modeling with these explicitly deals with any censoring constraints. An application is provided that investigates the relation between the business cycle and the yield spread.
|Date of creation:||Jan 2009|
|Contact details of provider:|| Postal: Crawford Building, Lennox Crossing, Building #132, Canberra ACT 2601|
Phone: +61 2 6125 4705
Fax: +61 2 6125 5448
Web page: http://cama.crawford.anu.edu.au
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gerhard Bry & Charlotte Boschan, 1971. "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs," NBER Books, National Bureau of Economic Research, Inc, number bry_71-1, 08.
- Arturo Estrella & Frederic S. Mishkin, 1996.
"Predicting U.S. recessions: financial variables as leading indicators,"
9609, Federal Reserve Bank of New York.
- Arturo Estrella & Frederic S. Mishkin, 1998. "Predicting U.S. Recessions: Financial Variables As Leading Indicators," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 45-61, February.
- Arturo Estrella & Frederic S. Mishkin, 1995. "Predicting U.S. Recessions: Financial Variables as Leading Indicators," NBER Working Papers 5379, National Bureau of Economic Research, Inc.
- Kee-Hong Bae & G. Andrew Karolyi & Rene M. Stulz, 2000.
"A New Approach to Measuring Financial Contagion,"
NBER Working Papers
7913, National Bureau of Economic Research, Inc.
- Pagan,Adrian & Ullah,Aman, 1999.
Cambridge University Press, number 9780521355643, December.
- Cashin, Paul & McDermott, C. John & Scott, Alasdair, 2002.
"Booms and slumps in world commodity prices,"
Journal of Development Economics,
Elsevier, vol. 69(1), pages 277-296, October.
- C. John McDermott & Paul Cashin & Alasdair Scott, 1999. "Booms and Slumps in World Commodity Prices," IMF Working Papers 99/155, International Monetary Fund.
- Paul Cashin & C John McDermott & Alasdair Scott, 1999. "Booms and slumps in world commodity prices," Reserve Bank of New Zealand Discussion Paper Series G99/8, Reserve Bank of New Zealand.
- Stijn Claessens & M. Ayhan Kose & Marco E. Terrones, 2009.
"What happens during recessions, crunches and busts?,"
CEPR;CES;MSH, vol. 24, pages 653-700, October.
- Marco Terrones & Ayhan Kose & Stijn Claessens, 2008. "What Happens During Recessions, Crunches and Busts?," IMF Working Papers 08/274, International Monetary Fund.
- Claessens, Stijn & Kose, Ayhan & Terrones, Marco E, 2008. "What Happens During Recessions, Crunches and Busts?," CEPR Discussion Papers 7085, C.E.P.R. Discussion Papers.
- Asger Lunde & Allan Timmermann, 2000.
"Duration Dependence in Stock Prices: An Analysis of Bull and Bear Markets,"
Econometric Society World Congress 2000 Contributed Papers
1216, Econometric Society.
- Lunde A. & Timmermann A., 2004. "Duration Dependence in Stock Prices: An Analysis of Bull and Bear Markets," Journal of Business & Economic Statistics, American Statistical Association, vol. 22, pages 253-273, July.
- Lunde, Asger & Timmermann, Allan G, 2003. "Duration Dependence in Stock Prices: An Analysis of Bull and Bear Markets," CEPR Discussion Papers 4104, C.E.P.R. Discussion Papers.
- Ibbotson, Roger G & Jaffe, Jeffrey F, 1975. ""Hot Issue" Markets," Journal of Finance, American Finance Association, vol. 30(4), pages 1027-42, September.
- Adrian R. Pagan & Kirill A. Sossounov, 2003. "A simple framework for analysing bull and bear markets," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 23-46.
- Cashin, P. & McDermott, C. J., 1997.
"'Riding on the Sheep's Back': Examining Australia's Dependence on Wool Exports,"
Department of Economics - Working Papers Series
585, The University of Melbourne.
- Cashin, Paul & McDermott, C John, 2002. "'Riding on the Sheep's Back': Examining Australia's Dependence on Wool Exports," The Economic Record, The Economic Society of Australia, vol. 78(242), pages 249-63, September.
- Michael D. Bordo & David C. Wheelock, 2006. "When do stock market booms occur? the macroeconomic and policy environments of 20th century booms," Working Papers 2006-051, Federal Reserve Bank of St. Louis.
- Michael J. Dueker, 1997. "Strengthening the case for the yield curve as a predictor of U.S. recessions," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 41-51.
- Abdul d Abiad, 2003. "Early Warning Systems; A Survey and a Regime-Switching Approach," IMF Working Papers 03/32, International Monetary Fund.
- Robert M. de Jong & Tiemen Woutersen, 2007.
"Dynamic time series binary choice,"
Economics Working Paper Archive
538, The Johns Hopkins University,Department of Economics.
- Tiemen Woutersen & Robert M. de Jong, 2004. "Dynamic time series binary choice," Econometric Society 2004 North American Summer Meetings 365, Econometric Society.
- Graciela L. Kaminsky & Carmen M. Reinhart, 1996.
"The twin crises: the causes of banking and balance-of-payments problems,"
International Finance Discussion Papers
544, Board of Governors of the Federal Reserve System (U.S.).
- Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
- Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
- Reinhart, Carmen & Kaminsky, Graciela, 2000.
"Las crisis gemelas: las causas de los problemas bancarios y de balanza de pagos
[The twin crises: Te causes of banking and balance of payments problems]," MPRA Paper 13842, University Library of Munich, Germany.
- Gerhard Bry & Charlotte Boschan, 1971. "Foreword to "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs"," NBER Chapters, in: Cyclical Analysis of Time Series: Selected Procedures and Computer Programs, pages -1 National Bureau of Economic Research, Inc.
- Maheu, John M & McCurdy, Thomas H, 2000. "Identifying Bull and Bear Markets in Stock Returns," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(1), pages 100-112, January.
- Candelon, Bertrand & Piplack, Jan & Straetmans, Stefan, 2008. "On measuring synchronization of bulls and bears: The case of East Asia," Journal of Banking & Finance, Elsevier, vol. 32(6), pages 1022-1035, June.
- Baur, Dirk & Schulze, Niels, 2005. "Coexceedances in financial markets--a quantile regression analysis of contagion," Emerging Markets Review, Elsevier, vol. 6(1), pages 21-43, April.
- Daniel M. Chin & John F. Geweke & Preston J. Miller, 2000. "Predicting turning points," Staff Report 267, Federal Reserve Bank of Minneapolis.
- 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 307-328, April.
When requesting a correction, please mention this item's handle: RePEc:een:camaaa:2009-08. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Cama Admin)
If references are entirely missing, you can add them using this form.