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Are apparent findings of nonlinearity due to structural instability in economic time series?

Koop, G.M. and Potter, S. (2001) Are apparent findings of nonlinearity due to structural instability in economic time series? Econometrics Journal, 4 (1). pp. 37-55. ISSN 1368-4221

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Abstract

Many modelling issues and policy debates in macroeconomics depend on whether macroeconomic times 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. 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.

Item type: Article
ID code: 6941
Keywords: bayes factor, markov chain monte carlo, threshold autoregressive model, time varying parameter model, Probabilities. Mathematical statistics, Economic Theory, Economics and Econometrics
Subjects: Science > Mathematics > Probabilities. Mathematical statistics
Social Sciences > Economic Theory
Department: Strathclyde Business School > Economics
Depositing user: Strathprints Administrator
Date Deposited: 03 Oct 2008
Last modified: 21 May 2015 09:16
Related URLs:
URI: http://strathprints.strath.ac.uk/id/eprint/6941

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