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Working Paper 2007-019A

"Multivariate Contemporaneous Threshold Autoregressive Models"
by Michael J. Dueker, Zacharias Psaradakis, Martin Sola, and Fabio Spagnolo

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.

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Category > Applied Econometrics
Category > Finance
Author > Michael J. Dueker
Research Papers and Publications: JEL Code > C32
Research Papers and Publications: JEL Code > G12