Smooth Regimes, Macroeconomic Variables, andBagging for the Short-Term Interest Rate Process

In this paper we propose a smooth transition tree model for both the conditionalmean and variance of the short-term interest rate process. The estimation of suchmodels is addressed and the asymptotic properties of the quasi-maximum likelihoodestimator are derived. Model specification is also discussed. When the model isapplied to the US short-term interest rate we find (1) leading indicators for inflationand real activity are the most relevant predictors in characterizing the multipleregimes’ structure; (2) the optimal model has three limiting regimes.[...]