Aaltodoc publication archive (Aalto University institutional repository)
School of Business | Department of Economics | Economics | 2016
Thesis number: 14774
Characterizing Nonlinearities in US Business Cycles Using A Two-regime Switching STAR Model - Empirical Motivation from Dynamic Real Business Cycle and New Keynesian Paradigms
|Title:||Characterizing Nonlinearities in US Business Cycles Using A Two-regime Switching STAR Model - Empirical Motivation from Dynamic Real Business Cycle and New Keynesian Paradigms|
|Year:||2016 Language: eng|
|Department:||Department of Economics|
|Index terms:||kansantalous; taloustieteet; Yhdysvallat; suhdanteet; ennusteet; mallit|
|Key terms:||nonlinearity modeling, business cycles, regime-switching STAR, forecasting|
Nonlinear time series econometric models have contributed significantly in modeling macroeconomic and financial data. In the light of theoretical framework of business cycle, Money in the Utility Function Real Business Cycle (MIUF RBC) and New Keynesian (NK) paradigms and their equilibrium dynamics under exogenous shocks, this paper proposes a two-regime switching STAR model aiming to identify and capture nonlinear features of business cycle data, and compares its in-sample and out-of-sample performance against that from traditional linear models.
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