Multivariate Contemporaneous Threshold Autoregressive Models

FRB of St. Louis Working Paper No. 2007-019A

30 Pages Posted: 15 May 2007

See all articles by Michael Dueker

Michael Dueker

Russell Investments

Zacharias Psaradakis

University of London - Economics, Mathematics and Statistics

Martín Sola

Universidad Torcuato Di Tella; University of London - Economics, Mathematics and Statistics

Fabio Spagnolo

Brunel University London - Economics and Finance

Date Written: May 2007

Abstract

In this paper we propose a contemporaneous threshold multivariate smooth transition autoregressive (C-MSTAR) model in which the regime weights depend on the ex ante probabilities that latent regime-specific variables exceed certain threshold values. The model is a multivariate generalization of the contemporaneous threshold autoregressive model introduced by Dueker et al. (2007). A key feature of the model is that the transition function depends on all the parameters of the model as well as on the data. The stability and distributional properties of the proposed model are investigated. The C-MSTAR model is also used to examine the relationship between US stock prices and interest rates.

Keywords: Nonlinear autoregressive models, Smooth transition, Stability, Threshold

JEL Classification: C32, G12

Suggested Citation

Dueker, Michael and Psaradakis, Zacharias and Sola, Martín and Spagnolo, Fabio, Multivariate Contemporaneous Threshold Autoregressive Models (May 2007). FRB of St. Louis Working Paper No. 2007-019A. Available at SSRN: https://ssrn.com/abstract=986354 or http://dx.doi.org/10.2139/ssrn.986354

Michael Dueker (Contact Author)

Russell Investments ( email )

909 A Street
Tacoma, WA 98402
United States

HOME PAGE: http://sites.google.com/site/michaeldueker

Zacharias Psaradakis

University of London - Economics, Mathematics and Statistics ( email )

7-15 Gresse Street
London, WC1E 7HX
United Kingdom
+44 20 7631 6415 (Phone)
+44 20 7631 6416 (Fax)

HOME PAGE: http://www.econ.bbk.ac.uk/faculty/psaradakis/

Martín Sola

Universidad Torcuato Di Tella ( email )

Minones 2159
1428 Buenos Aires, 1428
Argentina
5411 4784 0080 (Phone)
5411 4784 9807 (Fax)

University of London - Economics, Mathematics and Statistics ( email )

Malet Street
London, WC1E 7HX
United Kingdom
+44 20 7631 6411 (Phone)
+44 20 7631 6416 (Fax)

HOME PAGE: http://www.econ.bbk.ac.uk/faculty/sola/

Fabio Spagnolo

Brunel University London - Economics and Finance ( email )

Uxbridge UB8 3PH
United Kingdom
+44 1895 816383 (Phone)
+44 1895 203303 (Fax)

HOME PAGE: http://www.brunel.ac.uk/depts/ecf/Staff/SpagnoloF/Main.htm

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