Recent developments in nonlinear time series modelling are reviewed. Three main types of nonlinear model are discussed: Markov Switching, Threshold Autoregression and Smooth Transition Autoregression. Classical and Bayesian estimation techniques are described for each model. Parametric tests for...

This paper introduces a new model of trend (or underlying) inflation. In contrast to many earlier approaches, which allow for trend inflation to evolve according to a random walk, ours is a bounded model which ensures that trend inflation is constrained to lie in an interval. The bounds of this...

We develop Bayesian methods of analysis for a new class of threshold autoregressive models: endogenous delay threshold. We apply our methods to the commonly used sunspot data set and find strong evidence in favor of the Endogenous Delay Threshold Autoregressive (EDTAR) model over linear and...

A univariate nonlinear model is estimated for US GNP that on many criteria outperforms standard linear models. The estimated model is of the threshold autoregressive type and contains evidence of asymmetric effects of shocks over the business cycle. In particular the nonlinear model suggests...

In this paper, we develop a bivariate unobserved components model for inflation and unemployment. The unobserved components are trend inflation and the non-accelerating inflation rate of unemployment (NAIRU). Our model also incorporates a time-varying Phillips curve and time-varying inflation...

The authors examine dynamic asymmetries in U.S. unemployment using nonlinear time series models and Bayesian methods. They find strong statistical evidence in favor of a two-regime threshold autoregressive model. Empirical results indicate that, once parameter and model uncertainty are both...

This paper introduces a new model of trend (or underlying) inflation. In contrast to many earlier approaches, which allow for trend inflation to evolve according to a random walk, ours is a bounded model which ensures that trend inflation is constrained to lie in an interval. The bounds of this...

This paper proposes a pair-wise approach to testing for output convergence that considers all N(N-1)/2 possible pairs of log per capita output gaps across N economies. A general probabilistic definition of output convergence is also proposed. The approach is compatible with individual output...

In theory the potential for credit risk diversification for banks could be substantial. Portfolio diversification is driven broadly by two characteristics: the degree to which systematic risk factors are correlated with each other and the degree of dependence individual firms have to the...

We provide a conceptual framework to analysis counterfactual scenarios using macroeconometric models. We consider UK entry to the euro. We derive conditional probability distributions for the difference between the future realisations of variables of interest subject to UK entry restrictions...