heterogeneous expectations in the gold market specification and estimation abstract the increase in the price of gold between 2002 and 2011 appears to be a candidate for a potential asset price bubble suggesting that chartists feedback traders were highly active in the gold market during this period hence this paper develops and tests empirically several models incorporating heterogeneous expectations of agents specifically fundamentalists and chartists for the gold market the empirical results show that both agent types are important in explaining historical gold prices but that the 10 year bull run of gold in the early 2000s is consistent with the presence of agents extrapolating long term trends technically this paper is a further step toward providing an empirical foundation for certain assumptions used in the heterogeneous agents literature for example the empirical results presented in this paper compare the economical and statistical significance of numerous switching variable specifications that are generally only introduced ad hoc

time varying smooth transition autoregressive models nonlinear regime switching behavior and structural change are often perceived as competing alternatives to linearity in this article we study the so called time varying smooth transition autoregressive tv star model which can be used both for describing simultaneous nonlinearity and structural change and for distinguishing between these features two modeling strategies for empirical specification of tv star models are developed monte carlo simulations show that neither of the two strategies dominates the other a specific to general to specific procedure is best suited for obtaining a first impression of the importance of nonlinearity and or structural change for a particular time series a specific to general procedure is most useful in careful specification of a model with nonlinear and or time varying properties an empirical application to a large dataset of u s macroeconomic time series illustrates the relative merits of both modeling strategies

evaluating forecasts from setar models of exchange rates we consider the forecasting performance of two setar exchange rate models proposed by krager and kugler j int money fin 12 1993 195 assuming that the models are good approximations to the data generating process we show that whether the non linearities inherent in the data can be exploited to forecast better than a random walk depends on both how forecast accuracy is assessed and on the state of nature evaluation based on traditional measures such as root mean squared forecast errors may mask the superiority of the non linear models generalized impulse response functions are also calculated as a means of portraying the asymmetric response to shocks implied by such models

u s and canadian industrial production indices as coupled oscillators abstract this paper uses ozaki s 1985 variable amplitude coefficient model to explore the impact of different types of dynamical linkages coupling between the indices of industrial production for the u s and canada empirical analysis reveals that for each country the requisite lag structure extends for up to six years and that the coupling linkages are functions of lagged changes in growth rates incorporating these linkages leads to an increased degree of oscillation in the equilibrium paths a marginal improvement in stability and somewhat greater synchronization between the two series the out of sample forecasts for each series are improved by the coupling

reassessing the empirical relationship between the oil price and the dollar abstract this paper aims at reassessing the empirical relationship between the real price of oil and the u s dollar real effective exchange rate over the 1974 2015 period we find that changes in both variables are now linked by a negative relationship going from the dollar exchange rate to the real oil price however the same relationship is found positive when ending the sample in the mid 2000s in line with the previous literature to understand and investigate this evolution we rely on a nonlinear smooth transition regression model in which the oil price dollar nexus depends on the dynamics followed by the u s currency our results show that the relationship is negative most of the times but turns positive when the dollar hits very high values as in the early eighties

economic activity and recession probabilities information content and predictive power of the term spread in italy the aim of the present article is to examine the information content of the italian term spread as for real economic growth rates and recession probabilities and to test its predictive power in forecasting regime probabilities to this end the relationship between the term spread and economic growth rates is modelled as a nonlinear one and specifically the logistic smooth transition model is used while a probit model is implemented to forecast recession probabilities specific to this article is the use of the oecd business cycle chronology which was never used before to this end for the italian case overall evidence supports the informative content of the spread in italy over the whole period 1984 2005 although results are more satisfactory as from 1992 in particular recession forecasts are generally better than those obtained with other chronologies previously adopted for the italian case isae and ecri

the nonlinear time series properties of unemployment rates some further evidence the time series properties of unemployment rates for germany japan the uk and the us are re examined evidence of nonlinear structure in the residuals of the most parsimonious linear arma models is reported for all countries except japan modelling this nonlinearity using setar models suggests strong asymmetry in unemployment dynamics and the presence of a possible limit cycle for the uk however residual diagnostics for these models indicate remaining structure alternative tar models conditioned on past growth rates of industrial production yield substantial reductions in residual variance over both linear and setar counterparts iid residuals in all cases other than the us and threshold values at or very near zero clearly identifying the asymmetric behaviour of unemployment during expansionary and contractionary phases of the business cycle

the influence of taiwan s stock market on bitcoin s price under taiwan s monetary policy threshold this study uses a smooth transition autoregressive model with exogenous variables starx to investigate whether there is a nonlinear relationship between bitcoin and taiwan s stock market taking i

evidence on nonlinear error correction in money demand the case of taiwan this paper proposes a nonlinear error correction model based upon smooth transition regression methodology the model is specified such that the short run adjustment toward long run equilibrium is nonlinear and that the error correction is a smooth function of long run deviation empirical results obtained from estimating m2 money demand in taiwan support the hypothesis of a nonlinear error correction process and provide better interpretation of change in the demand for money

modelling business cycle nonlinearity in conditional mean and conditional variance some international and sectoral evidence this paper tests for the presence of output mean and variance nonlinearities in international industrial production and uk and us sectoral production growth rates using armagqarch bilinear bl and joint bl gqarch models arma gqarch models confirm the presence of asymmetric variance effects in italian uk and us industrial production and in all sectors other than us nondurables and such that the conditional variance of output is increased following negative shocks bl models are identified for german italian and us industrial production and us manufacturing while bl gqarch models of joint nonlinearity in both conditional mean and conditional variance are also found to hold for us industrial production and manufacturing moreover with the exception of italy all bl and bl qarch models provide superior out of sample mean forecasts relative to forecasts from both naive models and models of the arma gqarch class

threshold effects in the patent growth relationship a pstr approach for 60 developed and developing countries this study analyzes whether there is a threshold effect in the innovation growth relationship using data from the period 2008 2017 we perform an analysis using 60 countries in the whole sample an

threshold nonlinearities in unemployment rates further evidence for the uk and g3 economies the paper appraises the in sample and out of sample adequacy of linear ar and nonlinear setar models of unemployment rates for germany japan the uk and the us tests are reported for the presence and specification of threshold nonlinearities setar model estimates limiting dynamic properties and residual diagnostics and out of sample forecasting performance in sample threshold non linearities are confirmed to be strongly present for the uk us and germany and more marginally so for japan out of sample excepting japan setar models provide superior onestep ahead forecast on rmse grounds most notably for the us final tests indicate that these models exhibit predictive accuracy in the sense of parameter and residual variance stability implying the potential for exploitation of such nonlinearity in official forecasting

the role of international reserves holding in buffering external shocks an extended literature analyzes the accumulation foreign exchange holding observed in many developing and emerging countries since the 2000s empirical studies on the self insurance motive suggest that high reserves economies are more resilient to financial crises and to international capital inflows volatility they show also that pre crisis foreign reserve accumulation explains post crisis growth however some papers suggest that the relationship between international reserves holding and reduced vulnerability is nonlinear meaning that reserve holding is subject to diminishing returns this paper devotes more attention to the potential nonlinear relationship between the foreign reserves holding and macroeconomic resilience to shocks for a sample of 9 emerging economies we assess to what extent the accumulation of international reserves allows to mitigate negative impacts of external shocks on the output gap while a major part of the literature focuses on the global financial crisis we investigate this question by considering two sub periods 1995 2003 and 2004 2013 we implement threshold var tvar model in which the structure is allow to change if the threshold variable crosses a certain estimated threshold we find that the effectiveness of reserve holding to improve the resilience of domestic economies to shocks has increased over time hence the diminishing returns of foreign reserve holding stressed in the previous literature must be qualified

another look at swedish business cycles 1861 1988 this paper considers nine long swedish macroeconomic time series whose business cycle properties were discussed by englund persson and svensson 1992 using frequency domain techniques it is found by testing that all but two of the logarithmed and differenced series are nonlinear the observed nonlinearity is characterized by star models the statistical and dynamic properties of the estimated star models are investigated using among other things parametrically estimated local or sliced spectra cyclical variation at business cycle frequencies does not seem to be constant over time for all series and it is difficult to find a swedish business cycle only two series may be regarded as having genuinely asymmetric cyclical variation standard granger noncausality tests are adapted to the nonlinear star case and the null hypothesis of noncausality is tested for pairs of series the results point at strong temporal interactions between series they also indicate that the assumption of functional form linear or star strongly affects the outcome of these pairwise tests

the effects of inflation uncertainty on interest rates a nonlinear approach in this article we investigate the effects of inflation variability on short term interest rates within a nonlinear smooth transition regression framework the test results suggest that only the conditional mean of the inflation is a nonlinear process whereas the conditional variance is time variant but linear using the square root of conditional variance as a proxy for inflation risk we estimate fisher equation augmented with inflation risk although the estimated fisher equations suggest that inflation risk reduces short term interest rates we find that the effects of inflation risk on interest rates are regime dependent particularly we find that the negative effects of inflation variability on nominal rates are greater in low inflationary regimes when compared to high inflationary regimes on the other hand it is found that both inflation and inflation uncertainty raise the expected inflation effect

some evidence of smooth transition nonlinearity in colombian inflation evidence of smooth transition autoregressive star representations is found in two out of three time series of different measures of annual inflation in colombia during this decade for monthly data the star type nonlinearities are asymmetric for inflation computed as the variation of cpi while for a measure of core inflation are symmetric thus lstar and estar models were respectively estimated no evidence of nonlinearity is found for traded goods inflation given the local dynamic properties of the estimated lstar model only positive shocks to prices could shift negative accelerating inflation rate from the upper to the lower regime by the same token only stochastic shocks can move the core accelerating inflation rate from the outer regime to the middle one but the explosive nature of this regime will impulse the accelerating inflation rate to the outer one

business cycle non linearities in uk consumption and production this paper develops non linear smooth transition autoregressive star models with two additive smooth transition components to capture the business cycle characteristics of uk real consumers expenditure and industrial production the results indicate consumption has essentially two business cycle regimes recession and expansion industrial production however is characterized by the three regimes of recession normal growth and high growth the transitions describing recovery from recession are very similar for the two variables stochastic simulations illustrate the dynamic responses of these models and emphasize that they are locally linear our results also indicate that the two transition star models have some forecast advantages over other specifications for periods of contraction copyright 2000 john wiley sons ltd

a nonlinear approach to us gnp 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 that the post 1945 us economy is significantly more stable than the pre 1945 us economy

the role of el nino southern oscillation in commodity price movement and predictability how are commodity prices related to the el nino southern oscillation enso cycle and has this relationship altered over time despite overwhelming evidence suggesting an important role played by the enso in global commodity production the relationship between this climate anomaly and prices is not a trivial corollary and requires careful investigation to account for potentially complex dynamics in the enso price relationship this study applies a time varying smooth transition autoregressive tv star modeling framework to monthly series of the sea surface temperature anomalies in the nino3 4 region and 46 primary commodity prices spanning the january 1982 december 2015 period the findings suggest apparent linkages between enso shocks and a set of agricultural commodities as well as forestry commodities and metals an unexpected deviation in enso results in two to five percentage point change in prices while up to 30 percent of price variation in the selected commodities can be attributed to enso shocks in the intermediate and long run importantly there are benefits to regime dependent modeling which in some instances facilitates unveiling causal linkages that may have been camouflaged in a linear setting several commodity prices also reveal evidence of structural change and in those instances the enso effect appears to have been mitigated over time suggesting some adaptive response to the known economic consequences of this climate anomaly

modeling nonlinearity of business cycles choosing between the cdr and star models nonlinear modeling has become popular in applied macroeconomics successful attempts include beaudry and koop s cdr current depth of the recession model of real gnp and various star smooth transition autoregression models of industrial production however these models have not been directly compared we compare cdr and star models of u s real gnp and industrial production we find i within sample the cdr model fits slightly better than the star model ii out of sample the cdr model forecasts better than the star model and iii the cdr model generates very different dynamics than the star model

cointegration and threshold adjustment this article proposes an extension to the engle granger testing strategy by permitting asymmetry in the adjustment toward equilibrium in two different ways we demonstrate that our test has good power and size properties over the engle granger test when there are asymmetric departures from equilibrium we consider an application namely whether there exists cointegration among interest rates for instruments with different maturities this issue has been widely tested with mixed results we argue that either cautious policy or possibly opportunistic behavior on the part of the federal reserve implies that an equilibrium relationship between short and long term interest rates exists but that adjustments from disequilibrium are asymmetric in nature empirical tests using u s yields confirm the asymmetric nature of error correction among interest rates of different maturities

the inadequacy of linear autoregressive model for real exchange rates empirical evidence from asian economies utilizing the formal linearity test of luukkonen saikkonen and terasvirta biometrika 75 491 499 1998 as diagnostic tool the empirical finding suggests that the linear autoregressive ar model is inadequate in describing the real exchange rates behaviour of 11 asian economies it is noted that the conventional battery of diagnostic tests is capable of identifying the inadequacy of the linear model in only three of these series moreover the linearity nature of this behaviour has been formally rejected in favour of the non linear smooth transition autoregressive star model the finding of non linearity in the data generating process of these real exchange rates warrants that the use of linear framework in empirical modelling and statistical testing procedures in the field of exchange rates may lead to an inappropriate policy conclusions

a note on efficiency of australian and new zealand stock markets in this article we re examine efficiency of the australia s and new zealand s stock markets extending recent work of narayan 2005 for this purpose we apply the nonlinear unit root test procedure recently developed by kapetanios et al 2003 the nonlinear unit root tests reject the null hypothesis of unit root suggesting that the both stock markets are not weak form efficient contrary to the findings of narayan 2005

exchange rate volatility across financial crises abstract this paper studies the impact of global financial turmoil on the exchange rate policies in emerging countries spillovers from advanced financial markets to currencies in emerging countries are likely to be exacerbated during crisis periods to test this hypothesis we assess the exchange rate policies by currencies volatility and investigate their relationship to a global financial stress indicator measured by the volatility on global markets we introduce the possibility of nonlinearities by running smooth transition regressions over a sample of 21 emerging countries from january 1994 to september 2009 the results confirm that exchange rate volatility does increase more than proportionally with the global financial stress for most countries in the sample we also evidence regional contagion effects spreading from one emerging currency to other currencies in the neighboring area

asymmetries and nonlinearities in italian macroeconomic fluctuations this paper reports the results of an empirical investigation of business cycle asymmetries in the italian economy macroeconomic time series both annual post unity and quarterly post world war ii are subjected to nonlinearity and asymmetry tests the dynamics of recessions and expansions are then modelled with threshold autoregressive and markov switching models the paper shows that allowing for two regimes is sufficient to account for the finding of neglected nonlinearity the results indicate that business cycle asymmetries can provide both an intuitive economic interpretation and a parsimonious representation of nonlinearities in macroeconomic time series

electoral reform and public policy outcomes in thailand the politics of the 30 baht health scheme how do changes in electoral rules affect the nature of public policy outcomes the current evidence supporting institutional theories that answer this question stems almost entirely from quantitative cross country studies the data of which contain very little within unit variation indeed while there are many country level accounts of how changes in electoral rules affect such phenomena as the number of parties or voter turnout there are few studies of how electoral reform affects public policy outcomes this article contributes to this latter endeavor by providing a detailed analysis of electoral reform and the public policy process in thailand through an examination of the 1997 electoral reforms specifically the author examines four aspects of policy making policy formulation policy platforms policy content and policy outcomes the article finds that candidates in the pre 1997 era campaigned on broad generic platforms parties had no independent means of technical policy expertise the government targeted health resources to narrow geographic areas and health was underprovided in thai society conversely candidates in the post 1997 era relied more on a strong detailed national health policy parties created mechanisms to formulate health policy independently the government allocated health resources broadly to the entire nation through the introduction of a universal health care system and health outcomes improved the author attributes these changes in the policy process to the 1997 electoral reform which increased both constituency breadth the proportion of the population to which politicians were accountable and majoritarianism

nonlinear autoregressive leading indicator models of output in g 7 countries this paper studies linear and nonlinear autoregressive leading indicator models of business cycles in g 7 countries our models use the spread between short term and long term interest rates as leading indicators for gdp we examine data admissibility by determining whether these models have the ability to produce time series with classical cycles that resemble the observed classical cycles in the data and then we ask whether this data admissibility lends itself to better predictions of the probability of recession copyright 2007 john wiley sons ltd

modeling non linearities in real effective exchange rates abstract the aim of this paper is to test for and model non linearities in the real effective exchange rates of 10 major industrial countries the g 10 to exploit non linear dependencies in exchange rates we apply the star smooth transition autoregressive family of models these non linear models imply the existence of two distinct regimes in exchange rates with potentially different dynamic properties but the transition between the regimes is smooth tests reject linearity for eight exchange rates the real exchange rate process is cyclical in both regimes for almost all countries and there appears to be some evidence of asymmetry star models outperform hamilton s markov regime switching model in an out of sample forecasting contest

stock market volatility and business cycle evidence from linear and nonlinear causality tests this paper investigates the relationship between stock market volatility and the business cycle in four major economies namely the us canada japan and the uk we employ both linear and nonlinear bivariate causality tests and we further conduct a multivariate analysis to explore possible spillover effects across countries our results suggest that there is a bidirectional causal relationship between stock market volatility and the business cycle within each country and additionally reveal that the recent financial crisis plays an important role in this context finally we identify a significant impact of the us on the remaining markets

pegging emerging currencies in the face of dollar swings the aim of this article is to study ruptures of exchange rate pegs by focusing on the fluctuations of the anchor currency we test for the hypothesis that currencies linked to the usd are more likely to loosen their peg when the usd is appreciating while sticking to it otherwise to this end we estimate smooth transition regression models for a sample of 28 emerging currencies over the 1994 2011 period our findings show that while the real effective exchange rates of most of these countries tend to co move with that of the usd in times of depreciation this relationship is frequently reversed when the us currency appreciates over a certain threshold

long run money demand revisited evidence from a non linear approach abstract in this paper we argue that employing the conventional linear cointegration approach in examining long run money demand may not be appropriate after taking into account the existence of transaction costs we provide evidence to show that deviations from equilibrium money demand follow an exponential smooth transition autoregressive process that is mean reverting outside a given range and has a unit root inside the range our findings also provide an alternative explanation for the failure of much of the existing literature to support a long run money demand function

the asymmetric effects of monetary policy a nonlinear vector autoregression approach this paper tests for nonlinearity in a standard vector autoregression including output prices and money supply using an estimation strategy that is consistent with a wide range of structural macroeconomic models shocks to the money supply are found to have stronger output effects and weaker price effects when output growth is initially low positive and negative monetary shocks are found to have nearly symmetric effects in addition there is some evidence that shocks of different magnitudes have asymmetric effects these results are consistent with the view that the aggregate supply curve is convex

modelling electricity demand in ghana revisited the role of policy regime changes as policy regime changes demand elasticities are unlikely to be constant since individuals change how they form their expectations and this will change the estimated decision rules in this paper the time varying nature of electricity demand elasticities prior to and post the economic reform period in ghana is analysed using the fm ols three different sample periods pre reform post reform and full period was used in the analysis the result from the full sample period revealed that in the long run electricity demand is significantly affected by industry efficiency industry value added and real per capita gdp urbanization rate however has no significant effect the pre reform estimate showed lower income output and urbanization elasticities but higher industry energy efficiency elasticity relative to the post reform period this suggests that technological change in the pre reform period has been energy saving whilst technological change in the post reform period has been energy consuming the result further showed evidence of changing structure of the economy from the more energy intensive sector to the less energy intensive sector after the reform government should renew her effort in promoting energy saving technologies in the industrial sector and adjust the industrial structure to encourage the expansion of low energy intensive industries or high technology efficient industries

nonlinear time series modelling an introduction 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 nonlinearity are reviewed with examples from the three types of model finally forecasting and impulse response analysis is developed

large shocks small shocks and economic fluctuations outliers in macroeconomic time series summary we analyse fifteen post world war i1 us macroeconomic time series using a modified outlier identification procedure based on tsay 1988a large shocks appear to be present in all the series we examined furthermore there are three basic outlier patterns i outliers seem to be associated with business cycles 2 outliers are clustered together both over time and across series 3 there appears to be a dichotomy between outlier behaviour of real versus nominal series also after controlling for outliers much of the evidence of non linearity in many of the time series is eliminated

the enso effect and asymmetries in wheat price dynamics summary climate has historically played a critical role in the development of nations primarily due to its intrinsic linkage with agricultural production and prices this study examines one such relationship between the better known and most talked about climate anomaly el nino southern oscillation enso and the international prices of wheat one of the most produced and consumed grain cereals in the world the enso price relationship moreover is assumed to be characterized by nonlinear dynamics because of the known asymmetric nature of enso cycles as well as that of wheat prices this study applies a vector smooth transition autoregressive vstar modeling framework to monthly spot prices of wheat from the united states the european union australia canada and argentina as well as the sea surface temperature anomalies from the nino3 4 region which serves as a proxy for the enso variable results show that overall wheat prices tend to increase after la nina events and decrease after el nino events the regime dependent dynamics are apparent with more amplified price responses after la nina shocks and with more persistent price responses during the la nina conditions this is consistent with the economics of storage wherein shocks related to expected supply and demand are known to have a more pronounced effect in a low inventory regime findings of this study have strong implications for development economics as they point to an additional channel of adversity due to the enso related climate shocks moreover the enso induced price fluctuations are likely to affect the dynamics of international food and cash programs during extreme episodes of this climate anomaly

government expenditures and revenues evidence from asymmetric modeling 1 introductionexamining the empirical relationship between government revenues and expenditures is a crucial step in understanding the future path of the budget deficit four alternative explanations have been used to describe the relationship between these variables in the budgetary process i the tax and spend hypothesis ii the spend and tax hypothesis iii the fiscal synchronization hypothesis and iv the institutional separation hypothesis the issue of which hypothesis best describes the nature of the budgetary process has yet to be resolved in the literature however existing research has implicitly assumed that the state of the budget and whether or not the budget deficit or surplus is worsening or improving does not matter we argue that government decision makers may take these factors into account when determining expenditures and tax policy as such this article reexamines the tax spend debate by using a more robust econometric technique that allows for asymmetry in the relationship between revenues and expenditures until now the empirical evidence on the tax spend debate has focused almost exclusively on two conventional econometric techniques depending on the cointegrating properties between revenues and expenditures these techniques are based on either variations of the unrestricted vector autoregression uvar or the vector autoregression error correction model ecm 1 if for example the two budgetary variables are not cointegrated then the application of causality2 tests requires the use of stationary variables in the uvar model 3 on the other hand if the two budgetary variables are cointegrated then the application of causality tests requires an ecm specification it is important to note that the ecm specification implicitly assumes that the adjustment process of expenditures and revenues due to disequilibrium between the variables is strictly symmetric indeed if the adjustment is asymmetric then the symmetric adjustment implicitly assumed in the conventional techniques to ascertain causality implies model misspecification this specification error may lead to misguided and perhaps inappropriate fiscal policy decisions accurate estimation of the revenue and expenditure process is especially important as changes in taxes and spending alter incentives for work investment and productive activity cea 2004 thus the anticipated behavioral responses of households and businesses may be better captured by more general models that allow for asymmetry in the tax spend relationship to this end this article examines the existence of cointegration between revenues and expenditures and the corresponding ecm specification by using the recently developed techniques of asymmetric modeling in particular we employ the threshold autoregression tar and momentum threshold autoregression m tar models developed by enders and granger 1998 and enders and siklos 2001 within the context of these models we shed new light on whether budget surpluses versus budget deficits or an improving budget versus a worsening budget have asymmetric effects on the dynamic behavior of expenditures and revenues there is an a priori rationale for modeling asymmetry in the budget and for the response of its components to disequilibrium this rationale can be categorized into four factors first the fiscal policymakers may respond differently to a deviation of the deficit or surplus from its long run trend one would expect for example that the response would be more aggressive if the deficit was greater than its long run trend than if it was less than its trend second it is widely acknowledged that there is a very close connection between the budget and the business cycle through automatic fiscal stabilizers and discretionary fiscal measures to the extent that the business cycle is asymmetric the associated change in the budget may also be asymmetric

nonlinearity and stationarity of inflation rates evidence from the euro zone countries earlier studies hardly reject the hypothesis of a unit root in inflation few studies have examined the possibility of nonlinearity in inflation and tested nonlinear stationarity of the inflation rates this study thus intends to fill the gap this study utilizes the tests for nonlinearity along with the unit root tests that allow for nonlinearity in the variables to examine the stationarity of inflation rates of 12 european countries that formed the euro zone ez later in the sample period the results suggest that the majority of these countries inflation rates can be characterized by mean reversion during the floating exchange rate period many of them appear to be nonlinear stationary this finding is essential in conducting applied economic studies for these countries when constructing models whose validity relies on whether or not inflation is stationary the results of this study also imply that shocks to inflation have a transitory effect on inflation in the euro area therefore it would be le

testing nonlinearities in economic growth in the oecd countries an evidence from setar and star models this study estimates the self exciting threshold autoregressive setar and smooth transition autoregressive star models and examines the nonlinear and regime switching dynamics of economic growth for a set of 10 oecd countries the null of linearity in setar model is tested using the recursive polynomial f test of tsay and the bootstrap based supremum average and exponential average lagrange multiplier lm tests of hansen the f test of tsay rejects the null of linearity for all the countries except spain and switzerland the setar model of hansen reinforces the evidence and suggests the rejection of linear model the star model rejects the null of linearity against star nonlinearity for all the countries except denmark and switzerland the sequential f tests for the conditional nulls suggest the lstar nonlinearity for australia belgium france sweden and uk and the estar nonlinearity for canada spain and the usa

characterizing nonlinearities in business cycles using smooth transition autoregressive models during the past few years investigators have found evidence indicating that various time series representing business cycles such as production and unemployment may be nonlinear in this paper it is assumed that if the time series is nonlinear then it can be adequately described by a smooth transition autoregressive star model the paper describes the application of these models to quarterly logarithmic production indices for 13 countries and europe tests reject linearity for most of these series and estimated star models indicate that the nonlinearity is needed mainly to describe the responses of production to large negative shocks such as oil price shocks

smooth transition pollution income paths abstract we explore the idea of regime switching as a new methodological approach in the analysis of the emission income relationship the basic idea is that when some threshold is passed the economy could move smoothly to another regime with the emission income relationship being different between the old and the new regime the methodology is applied to a panel dataset of us state level sulfur dioxide and nitrogen oxide emissions sulfur dioxide emissions are found to smoothly peak at a relatively late stage of economic development and then smoothly decrease at high levels of income however for the nitrogen oxide emissions environmental pressure tends to rise with economic growth then slows down but does not decline with further growth

are linear models really unuseful to describe business cycle data we use first differenced logged quarterly series for the gdp of 29 countries and the euro area to assess the need to use nonlinear models to describe business cycle dynamic behaviour our approach is model estimation free based on testing only we aim to maximize power to detect non linearities and simultaneously we purport avoiding the pitfalls of data mining the evidence we find does not support some descriptions because the presence of significant non linearities is observed for 2 3 of the countries only linear models cannot be simply dismissed as they are frequently useful contrarily to common knowledge nonlinear business cycle variation does not seem to be an universal undisputable and clearly dominant stylized fact this finding is particularly surprising for the u s case some support for nonlinear dynamics for some further countries is obtained indirectly through unit root tests but this is marginal to our study based on indirectmethods only and can hardly be invoked to support nonlinearity in classical business cycles

are there asymmetries of nonlinearities in uk output this paper investigates whether quarterly post war uk output growth contains either asymmetries or nonlinearities through subjecting the series to a variety of diagnostic testa and by fiting various nonlinear business cycle models no evidence is uncovered of any form of asymetric or nonlinear departure from the pure random walk with drift model of output

do recessions permanently change output abstract this paper examines whether negative innovations to gnp are more or less persistent than positive innovations we find that once we allow for the impulse response of gnp to be asymmetric negative innovations to gnp are observed to be much less persistent than positive ones in particular the effect of a recession on the forecast of output is found to be negligible after only eight to twelve quarters while the effect of a positive shock is estimated to be persistent and amplified over time our results may therefore help reconcile two antagonistic views about the nature of business cycle fluctuations

asymmetric impacts of the determinants of energy intensity in nigeria abstract this study analysed the problem of energy intensity determinants in nigeria based on the fully modified ols and canonical cointegration regressions these methods were preferred since they are able to deal effectively with the second order bias problems an often characteristics of time series data the impacts of price of crude oil fdi trade openness and industry structure are asymmetric which suggests the presence of structural effects in parameters the impact of crude oil price is negative but becomes stronger post 1989 saving 126 more in energy consumption relative to pre 1989 also the impacts of fdi and trade openness are negative and significant but become stronger post 1989 saving 11 2 and 0 8 more in energy consumption relative to the baseline respectively for every one percentage point increase in fdi and trade openness the impact of industry value added is positive and significant but weakens after 1989 consuming 1 8 less in energy for every one percentage point increase in industry value added relative to the baseline the energy reducing effect of industry value added post 1989 reflects improvements in the technical characteristics of industrial sector in nigeria last the result showed that the absorptive capability and industry characteristics of nigeria are important determinants of how fdi affects energy intensity this implies that a more integrated fdi programme considering the country characteristics rather than a one fit all programme is preferable

on the dynamic properties of asymmetric models of real gnp there is now a substantial body of evidence that suggests business cycles are asymmetric however the evidence has been accumulated using a wide array of statistical techniques and consequently is based on various definitions of asymmetry this paper examines several parametric models that have been used to study asymmetries in real gnp although these models capture asymmetries in very different ways their dynamic properties are remarkably similar

incentives in competitive search equilibrium this paper proposes a labor market model with job search frictions where workers have private information on match quality and eort firms use wage contracts to motivate workers in addition wages are also used to attract employees we de ne and characterize competitive search equilibrium in this context and show that it satis es a simple modi ed hosios rule the model is used to address the shimer puzzle related to the low volatility of the unemployment rate relative to the volatility of output observed in the data we nd that private information may increase the responsiveness of the unemployment rate to changes in productivity and in particular to changes in

patents vs publications and r d three sides of the same coin panel smooth transition regression pstr for oecd and brics countries abstractthe paper aims to define the optimal thresholds of publications and research and development r d expenditure and to investigate their impacts on patenting in oecd and brics countries to

the demand for broad money in the united kingdom 1878 1993 using annual data from friedman and schwartz 1982 hendry and ericsson 1991a developed an empirical model of the demand for broad money in the united kingdom over 1878 1975 we update that model over 1976 1993 accounting for changed data definitions and clarifying the concept of constancy with appropriate measures of opportunity cost and credit deregulation the model s parameters are empirically constant over the extended sample which was economically turbulent policy implications follow for parameter nonconstancy and predictive failure causation between money and prices monetary targeting deregulation and financial innovation and the effect of policy on economic agents behavior

asymmetry in the business cycle evidence from the australian labour market abstract cyclical asymmetry has been recognised as a non linear phenomenon in recent studies examining unemployment rate time series the probalistic structure of such time series is different during upswings and downswings and models should reflect this change in structure by incorporating non linearities to allow for the switching in optimising behaviours between the different phases in this paper we use a number of established and new tests for identifying nonlinearities of different types as they occur in first differenced time series of the seasonally adjusted monthly australian aggregate and regional unemployment rates after identifying whether nonlinearity of a particular form is present in a given time series the appropriate non linear or linear model is fitted and the model analysed for cyclical behaviour

do central banks act asymmetrically empirical evidence from the ecb and the bank of england the paper attempts to exploit whether monetary authorities have a different behaviour during recession and expansion to this end a multivariate extension of hamilton markov switching model is adopted first regime dependent taylor type rules are estimated for the euro area and the united kingdom in order to capture the systematic behaviour of central banks then impulse response functions that account for the different phases of the business cycle are analysed in addition a comparative analysis concerning the estimated rules as well as the different reaction of real economy to monetary shocks is implemented the study strongly suggests that central banks cannot neglect the regime where the monetary action takes place it follows that the phase of business cycle is an important matter in monetary policy decision process

cyclical patterns in the variance of economic activity this article models the conditional mean and variance of real gross national product gnp and its components using asymmetric exponential generalized autoregressive conditional hetero scedasticity a model previously applied only to financial variables the results imply that the variance of real gnp is higher following negative innovations than positive innovations and that this asymmetry arises in the cyclically sensitive sectors further evidence links this asymmetry to the phase of the business cycle the conditional variance appears to be largest around business cycle troughs in addition shocks to the conditional variance of gnp and its components typically persist for long periods the evidence of asymmetry in conditional variance is robust to a variety of alternative specifications

the relationship between co2 emissions and economic growth the case of korea with nonlinear evidence abstract using star models we investigate the nonlinear dynamic properties and the interdependence of co2 emissions and economic growth for korea the estimation results indicate that the growth rate of both co2 emissions and industrial production exhibit a significant nonlinear asymmetric dynamics while the linear granger causality test finds no causality in any direction the results of the nonlinear granger causality tests show a two way causality between co2 emissions and economic growth the strong mutual causation between co2 emissions and economic activities indicates that the economic impact from co2 mitigation is expected to be higher in korea this suggests that the appropriate energy and environmental policy be to mitigate co2 emissions while having less impact on the economy

threshold nonlinearities in output some international evidence the empirical adequacy of linear ar and nonlinear setar models of trend stationary and difference stationary representations of output for canada germany japan the uk and the us are appraised test results suggest the presence of linear model residual structure of some form for all series and nonlinearities of specifically threshold form in trend stationary data for canada germany japan and the us and difference stationary data for germany japan and the us with the exception of canada estimated threshold nonlinear models imply asymmetric dynamics are able to account for all nonlinear structure in the data on the basis of bds statistics and provide sizeable reductions in residual variance in several cases most notably for germany

causes of nonlinearities in low order models of the real exchange rate abstract this paper investigates the extent to which modern dsge models which feature local currency pricing home bias nontraded goods and incomplete markets can generate nonlinear real exchange rate dynamics that are consistent with those found in the time series literature using data from the current floating period our key findings are as follows first if the true model can be appropriately characterized as a set of linear equations then linearity tests that utilize univariate autoregressions of the real exchange rate suffer from an omitted variables problem which leads them to overestimate the true incidence of nonlinearity consequently studies that fail to control for this problem may spuriously find evidence of nonlinearities in the data despite the fact that the data generating process may be linear second we propose a strategy that can largely eliminate this distortion finally we find that dsge models solved using higher order approximations are capable of generating true structural nonlinearities in real exchange rates both asymptotically and in short samples

non linearities in the dynamics of oil prices abstract examining stationarity is of particular importance and represents the first step in empirical time series research non stationarity invalidates many of the results obtained from standard techniques and therefore requires special treatment because oil prices play an important role in affecting economic variables this paper examines the stationarity of real oil prices brent dubai wti and the world over the period 1973 2 2011 2 real oil prices are expressed in the currencies of seven asian countries indonesia japan korea malaysia the philippines singapore and thailand and in the u s dollar while using linear unit root tests without structural breaks shows no evidence of stationarity allowing for breaks shows very limited evidence of stationarity we argue that these results are attributed to the presence of nonlinearities in the behavior of oil prices testing for nonlinearity shows significant evidence of nonlinearity in all the cases with evidence of exponential smooth transition autoregression estar nonlinearity type in most cases applying unit root tests that account for two types of nonlinearities smooth transition and nonlinear deterministic trends reveals evidence of stationarity in all the cases

evidence on purchasing power parity from univariate models the case of smooth transition trend stationarity recent research has found that trend break unit root tests derived from univariate linear models do not support the hypothesis of long run purchasing power parity ppp for us dollar real exchange rates in this paper univariate smooth transition models are utilized to develop unit root tests that allow under the alternative hypothesis for stationarity around a gradually changing deterministic trend function these tests reveal statistically significant evidence against the null hypothesis of a unit root for the real exchange rates of a number of countries against the us dollar however restrictions consistent with long run ppp are rejected for some of the countries for which a rejection of the unit root hypothesis is obtained

does growth vary over the business cycle some evidence from the g7 countries in this paper we analyse the dynamics of business cycles in the g7 countries our aim is to answer the question of whether growth varies in an absolute sense over the business cycle and hence to examine whether the simple two phase characterization downturn upturn is an appropriate description of the business cycle to study growth over the cycle we estimate single country equations and then a pooled regression that takes into account the important interactions of international business cycles the results confirm the steepness asymmetry of the growth cycles and show that growth varies systematically within upturns and downturns these are consistent with the notion of deepness asymmetry which implies that contractions are more pronounced in the later stages of a downturn whereas expansions are stronger immediately after troughs

asymmetries in the dynamic interrelationship between energy consumption and economic growth evidence from turkey abstract in this study we examine possible nonlinearities in dynamic interrelationship between energy consumption and economic growth in turkey for the 1960 2010 period by using a smooth transition vector autoregressive model in order to trace the effects of one variable on another we calculate generalized impulse response functions girfs the computed impulse response functions demonstrate asymmetric effects of positive versus negative and small versus large energy consumption shocks on output growth and vice versa specifically we find that negative energy shocks have a greater effect on output growth than positive energy shocks and that big negative energy shocks affect output much more than small negative energy shocks similarly we find that positive output shock has a greater effect on energy consumption whereas negative shocks have almost no effect on energy consumption the results of this study have clear and important implications for energy economists and policymakers in turkey

el nino la nina and world coffee price dynamics coffee is produced in equatorial and subequatorial regions of the world which are also most affected by el ni no southern oscillation enso enso events have a tendency to amplify weather conditions such as droughts or excess precipitation in the affected regions resulting in production shortage or excess supply subsequently impacting agricultural commodity prices in this research we assess effects of enso events on world coffee price dynamics using the monthly data between march 1989 and december 2010 we employ smooth transition autoregression framework to examine nonlinear dynamics of enso and coffee prices and illustrate the results of this research using generalized impulse response functions we find that enso events indeed have short term impacts on coffee prices the research findings are of interest to coffee producers and intermediaries in the coffee markets as well as researchers in the fields of environmental and development economics jel classifications c32 q11 q54

the asymmetric effects of oil price and monetary policy shocks a nonlinear var approach in this paper we investigate the asymmetric effects of oil price shocks and monetary policy on macroeconomic activity using monthly data for the united states over the period from 1983 1 to 2008 12 in doing so we use a logistic smooth transition vector autoregression var as detailed in terasvirta and anderson 1992 and weise 1999 and make a distinction between two oil price volatility regimes high and low using the realized oil price volatility as a switching variable we isolate the effects of oil price and monetary policy shocks and their asymmetry on output growth and following koop et al 1996 and weise 1999 we employ simulation methods to calculate generalized impulse response functions girfs to trace the effects of independent shocks on the conditional means of the variables our results suggest that in addition to the price of oil oil price volatility has an impact on macroeconomic activity and that monetary policy is not only reinforcing the effects of oil price shocks on output it is also contributing to the asymmetric response of output to oil price shocks

modelling business cycle movements in the uk economy this paper models the phases of the uk business cycle using gdp data with a time varying transition probabilities tvtp markov switching regime model and exogenous leading indicator variables single indicators in linear models are compared with the tvtp framework with logistic and exponential functions used in the latter the markov switching models capture the major recessions of the sample but the use of leading indicators through the tvtp framework can improve this regime recognition finally a forecast comparison shows that the tvtp models perform relatively well in predicting during the 1990s particularly when nominal interest rates are used to generate the regime switching probabilities

the out of sample forecasting performance of nonlinear models of regional housing prices in the us this article provides out of sample forecasts of linear and nonlinear models of us and four census subregions housing prices the forecasts include the traditional point forecasts but also include interval and density forecasts of the housing price distributions the nonlinear smooth transition autoregressive model outperforms the linear autoregressive model in point forecasts at longer horizons but the linear autoregressive and nonlinear smooth transition autoregressive models perform equally at short horizons in addition we generally do not find major differences in performance for the interval and density forecasts between the linear and nonlinear models finally in a dynamic 25 step ex ante and interval forecasting design we once again do not find major differences between the linear and nonlinear models in sum we conclude that when forecasting regional housing prices in the united states generally the additional costs associated with nonlinear forecasts outweigh the benefits for forecast

adaptation towards reference values a non linear perspective using large scale panel data we examine the dynamics of adjustment towards reference points for key workplace attributes we discover that an exponential smooth transition autoregressive estar model is superior to a linear model in characterizing such a process the speed of adjustment increases non linearly with the distance from reference points and adjustment is faster for job satisfaction shocks compared to shocks in earnings or work hours our findings lend further credence to the relative utility hypothesis and highlight the inherently non linear nature of the dynamic path of adjustment towards reference points a previously neglected issue in the adaptation literature

nonlinear business cycle dynamics cross country evidence on the persistence of aggregate shocks i introduction economists have long been interested in the dynamics of business cycles particularly regarding the symmetry of expansions and contractions more recently the specification of stochastic trends in economic growth has generated concerns about the relative persistence of positive and negative shocks to the economy several papers have looked at the persistence of business cycles including nelson and plosser 1982 campbell and mankiw 1987 cochrane 1988 diebold and rudebusch 1989 balke and fomby 1990 zelhorst and de haan 1994 and bradley and jansen 1995 while results vary especially on the issue of a unit root in output the overarching result is that output fluctuations are highly persistent one question not asked by the above authors is whether business cycle dynamics are asymmetric this issue has been investigated by neftci 1984 falk 1986 delong and summers 1986 hamilton 1989 diebold and rudebusch 1990 and terasvirta and anderson 1991 these authors take a variety of approaches but they reach a general conclusion that there is some evidence of asymmetric business cycle dynamics however most of these studies ask if contractions are shorter and steeper than expansions except hamilton 1989 they do not ask if there is a difference in persistence due to the asymmetries in a recent paper beaudry and koop 1993 propose a set of methods for simultaneously examining these two questions specifically beaudry and koop bk recommend the augmentation of the standard arma representation of real output growth through the inclusion of a nonlinear term that captures the relative state of the economy this augmentation provides for nonlinear dynamics and the possibility of asymmetric dynamic responses to positive and negative shocks in addition calculation of the implied impulse responses permits detection of the relative persistence implied by the combination of asymmetric cycle dynamics and stochastic trend based upon their analysis of u s data bk conclude that the response of the economy to positive and negative shocks is indeed asymmetric and the imposition of symmetry on impulse responses has likely led to misleading measures of persistence bk p 162 as a result bk conclude we find that the effects of negative shocks to be mainly temporary and the effects of positive shocks to be very persistent bk p 162 if bk s results are correct they have strong implications for the way macro economists view economic fluctuations and will in their words contribute to a reappraisal of some macroeconomic theories that is bk s results suggest that macroeconomic models must be revised to provide for temporary effects of negative shocks but permanent effects of positive shocks because of the potential importance of bk s results we examine the robustness of those results by modifying and extending bk s proposed methods of testing not only do we extend the analysis to the other six g7 countries besides the united states but also we redefine in a sensible way the nature of the nonlinear dynamics overall our results from other economies provide only mixed support for the asymmetry of cyclical dynamics and the lack of persistence of negative shocks ii the model to be estimated in the bk framework the estimated model includes an asymmetric response term the asymmetry is generated by a variable that measures the strength of a recession the variable is calculated as the distance between current real gdp and the previous peak level of real gdp that is bk define a measure they call current depth of the recession cdr where 1 cdr sub t max y sub t j sub j greater than or equal to 0 y sub t with this definition in place bk recommend augmenting an autoregressive model of real gdp growth as 2 phi l delta y sub t delta omega l 1 cdr sub

how does public information affect the frequency of trading in airline stocks abstract this paper examines how firm specific and macroeconomic announcements affect transaction rates in u s airline stocks using a version of the autoregressive conditional hazard framework of hamilton and jorda 2002 that incorporates market microstructure variables we show that on average trading intensity spikes prior and consequent to macroeconomic announcements but decreases around firm specific releases further when we use intraday crude oil futures returns as a proxy for industry relevant and globally important news we find that their effects are statistically significant with higher oil futures returns increasing the probability of trade

a monte carlo study of the forecasting performance of empirical setar models in this paper we investigate the multi period forecast performance of a number of empirical selfexciting threshold autoregressive setar models that have been proposed in the literature for modelling exchange rates and gnp amongst other variables we take each of the empirical setar models in turn as the dgp to ensure that the non linearity characterises the future and compare the forecast performance of setar and linear autoregressive models on a number of quantitative and qualitative criteria our results indicate that non linear models have an edge in certain states of nature but not in others and that this can be highlighted by evaluating forecasts conditional upon the regime

testing for nonlinear autoregression this article considers consistent testing the null hypothesis that the conditional mean of an economic time series is linear in past values two specific tests are discussed the cramer von mises and the kolmogorov smirnov tests the particular feature of the proposed tests is that the bootstrap is used to estimate the nonstandard asymptotic distributions of the test statistics considered the tests are justified theoretically by asymptotics and their finite sample behaviors are studied by means of monte carlo experiments the tests are applied to five u s monthly series and evidence of nonlinearity is found for the first difference of the logarithm of the personal income and for the first difference of the unemployment rate no evidence of nonlinearity is found for the first difference of the logarithm of the u s dollar japanese yen exchange rate for the first difference of the 3 month t bill interest rate and for the first difference of the logarithm of the m2 money stock contrary to typically use

business cycle asymmetries characterisation and testing based on markov switching autoregressions tests for business cycle asymmetries are developed for markov switching autoregressive models the tests of deepness steepness and sharpness are wald statistics which have standard asymptotics for the standard two regime model of expansions and contractions deepness is shown to imply sharpness and vice versa whereas the process is always nonsteep two and three state models of u s gnp growth are used to illustrate the approach along with models of u s investment and consumption growth the robustness of the tests to model misspecification and the effects of regime dependent heteroscedasticity are investigated

a multi level panel star model for us manufacturing sectors we introduce a multi level smooth transition model for a panel of time series which can be used to examine the presence of common nonlinear business cycle features across many variables the model is positioned in between a fully pooled model which imposes such common features and a fully heterogeneous model which allows for unrestricted nonlinearity we introduce a second stage model linking the parameters that determine the timing of the switches between business cycle regimes to observable explanatory variables thereby allowing for lead lag relationships across panel members we discuss representation estimation by concentrated simulated maximum likelihood and inference we illustrate our model using quarterly industrial production in 19 us manufacturing sectors and document that there are subtle differences across sectors in leads and lags for switches between business cycle recessions and expansions copyright 2005 john wiley sons ltd