Nonlinear Dynamics and Structural Change in the U.S. Hog-Corn Cycle: A Time-Varying STAR Approach

The linearity of the U.S. hog-corn cycle has been questioned by <link rid="b4">Chavas and Holt (1991)</link>. Even so, attempts have not been made to model the potential nonlinear dynamics in the hog-corn cycle by using regime-switching models. One popular alternative is <link rid="b43">Teräsvirta's</link> smooth transition autoregressive (STAR) model, which assumes regime switching is endogenous and potentially smooth. In this article, we examine monthly data for the U.S. hog-corn cycle, 1910-2004. A member of the STAR family, the time-varying STAR, is fitted to the data and its properties examined. We find evidence of nonlinearity, regime-dependent behavior, and time-varying parameter change. Copyright 2006 American Agricultural Economics Association.