This paper proposes a contemporaneous-threshold smooth transition GARCH (or CSTGARCH) model for dynamic conditional heteroskedasticity. The C-STGARCH model is a generalization to second conditional moments of the contemporaneous smooth transition threshold autoregressive model of Dueker et al....

This paper investigates the presence of target-zone nonlinearities in the Pound Sterling/Deutsche Mark exchange rate for the period of the UK European Exchange Rate Mechanism (ERM) membership, using data with frequency of every two days. Tests against general nonlinear specifications as well as...

This paper explores the interactions between cross-sectional aggregation and persistence of volatility shocks. We derive the ARMA-GARCH representation that linear aggregates of ARMA processes with GARCH errors admit, and establish conditions under which persistence in volatility of the aggregate...

This paper considers the problem of estimating Markov regime switching models with endogenous explanatory variables. When the data-generating process for consumption is subject to Markov regime switching, the standard model for the term structure of interest rates based on the Euler equations...

In this paper we examine a model of cointegration where long-run parameters are subject to switching between several different cointegrating regimes. These shifts are allowed to be governed by the outcome of an unobserved Markov chain with unknown transition probabilities. We illustrate this...

This paper demonstrates, by means of Monte Carlo experimentation, that tests of the expectations hypothesis of the term structure based on instrumental variables regressions of the change in the short rate on the relevant lagged yield spread are prone to severe over-rejection when the term...

This paper proposes 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. A key feature of the model is that the transition...

In this paper we consider extensions of smooth transition autoregressive (STAR) models to situations where the threshold is a time-varying function of variables that affect the separation of regimes of the time series under consideration. Our specification is motivated by the observation that...

This paper proposes 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. A key feature of the model is that the transition...