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The Vector Floor and Ceiling Model

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posted on 12.08.2009, 13:24 by Gary Koop, Simon M. Potter
This paper motivates and develops a nonlinear extension of the Vector Autoregressive model which we call the Vector Floor and Ceiling model. Bayesian and classical methods for estimation and testing are developed and compared in the context of an application involving U.S. macroeconomic data. In terms of statistical significance both classical and Bayesian methods indicate that the (Gaussian) linear model is inadequate. Using impulse response functions we investigate the economic significance of the statistical analysis. We find evidence of strong nonlinearities in the contemporaneous relationships between the variables and milder evidence of nonlinearity in the conditional mean.

History

Publisher

Dept. of Economics, University of Leicester

Available date

12/08/2009

Publisher version

http://www.le.ac.uk/economics/research/discussion/papers2004.html

Book series

Papers in Economics;04/15

Language

en

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