Estimation of threshold time series models using efficient jump MCMC

This paper shows how a Metropolis-Hastings algorithm with efficient jump can be constructed for the estimation of multiple threshold time series of the U.S. short term interest rates. The results show that interest rates are persistent in a lower regime and exhibit weak mean reversion in the upper regime. For model selection and specification several techniques are used such as marginal likelihood and information criteria, as well as estimation with and without truncation restrictions imposed on thresholds.