scholarly journals A MOMENT-MATCHING METHOD FOR APPROXIMATING VECTOR AUTOREGRESSIVE PROCESSES BY FINITE-STATE MARKOV CHAINS

2013 ◽  
Vol 29 (5) ◽  
pp. 843-859 ◽  
Author(s):  
Nikolay Gospodinov ◽  
Damba Lkhagvasuren
Keyword(s):  
Markov Chains ◽  
Moment Matching ◽  
Autoregressive Processes ◽  
Matching Method ◽  
Vector Autoregressive ◽  
Finite State ◽  
Vector Autoregressive Processes

VECTOR AUTOREGRESSIVE PROCESSES WITH NONLINEAR TIME TRENDS IN COINTEGRATING RELATIONS

2001 ◽  
Vol 5 (4) ◽  
pp. 577-597 ◽  
Author(s):  
Antti Ripatti ◽  
Pentti
Keyword(s):  
Structural Changes ◽  
Asymptotic Theory ◽  
Var Model ◽  
Level Shift ◽  
Autoregressive Processes ◽  
Short Term ◽  
Vector Autoregressive ◽  
Market Rate ◽  
Nonlinear Trends ◽  
Vector Autoregressive Processes

We extend the conventional cointegrated VAR model to allow for general nonlinear deterministic trends. These nonlinear trends can be used to model gradual structural changes in the intercept term of the cointegrating relations. A general asymptotic theory of estimation and statistical inference is reviewed and a diagnostic test for the correct specification of an employed nonlinear trend is developed. The methods are applied to Finnish interest-rate data. A smooth level shift of the logistic form between the own-yield of broad money and the short-term money market rate is found appropriate for these data. The level shift is motivated by the deregulation of issuing certificates of deposit and its inclusion in the model solves the puzzle of the “missing cointegration vector” found in a previous study.

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