We contribute a new method for dealing with the problem of endogeneity of the threshold variable in threshold vector auto-regression (TVAR) models. Drawing on copula theory, enables us to capture the dependence structure between the threshold variable and the vector of TVAR innovations,...

Contrary to the predictions of the rational expectations hypothesis of the term structure of interest rates, empirical evidence suggests that the term spread between long and short rates fails to forecast future movements of long term rates although its forecasts of future short term rates are...

This paper evaluates the VaR forecasting performance of the Markov regime switching (MRS) based volatility models, allowing for EGARCH effects. As is argued in the literature, this extension of the MRS model model may improve its forecasting performance due to its ability to capture leverage...

This paper employes a parametric model of structural breaks in the mean of stock returns which allows them to be endogenously driven by large positive or negative stock market return shocks. These shocks can be taken to reflect important market announcements, monetary policy regime shifts and/or...

In this paper we introduce a discrete time pricing model for a European call option when the log-return of the underlying stock (asset) is subject to discontinuous market regime type of shifts in its mean or volatility whose risk can be priced in the market. The paper shows how to estimate this...

It is known that anti-social redistributive activities (rent seeking, tax evasion, corruption, violation of property rights, delay of socially beneficial reforms, etc) hurt the macroeconomy. But it is less known what is the role of government size as a determinant of such activities. We use data...

In this paper we study the link between elections, fiscal policy and aggregate fluctuations. The set-up is a stylized dynamic stochastic general equilibrium model incorporating both technology and political re-election shocks. The later are incorporated via a two-party model with elections. The...

This article studies the growth and welfare effects of public education spending in the USA for the post-war period. We calibrate a standard dynamic general equilibrium model, where human capital is the engine of long-run endogenous growth. Our results suggest that while increases in public...