Are Apparent Findings Of Nonlinearity Due To Structural Instability In Economic Time Series?  

Oleh:

Koop, Gary ; Potter, Simon

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Econometrics Journal vol. 4 no. 1 (2001), page 37-55.
Topik: Bayes Factor; Markov chain Monte Carlo; threshold autoregressive model; time varying parameter model
Fulltext: 37_1.pdf (3.88MB)

Isi artikel

Many modelling issues and policy debates in macroeconomics depend on whether macroeconomic time series are best characterized as linear or nonlinear. If departures from linearity exist, it is important to know whether these are endogenously generated (as in, e.g. a threshold autoregressive model) or whether they merely reflect changing structure over time. In this paper, we discuss a model comparison methodology which addresses these issues. We advocate a Bayesian approach and show how such an approach can be implemented in practice. An empirical exercise involving several macroeconomic time series shows that apparent findings of threshold type nonlinearities could be due to structural instability.

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