In this paper we present explanation on the phenomenon pointed out in Cook and Manning (2002) on the unusual behaviour of the Dickey-Fuller test in the presence of trend misspecification. It appears that the rejection frequency of the unit root tests in the presence of trend misspecification is...

The present paper introduces the Bi-parameter Smooth Transition Autoregressive (BSTAR) model that generalizes the LSTR2 model, see Terasvirta (1998). In contrast to the LSTR2 model, which features the symmetric transition function, the BSTAR model is characterized by the asymmetric transition...

In this paper we present explanation on the phenomenon pointed out in Cook and Manning (2002) on the unusual behaviour of the Dickey-Fuller test in the presence of trend misspecification. It appears that the rejection frequency of the unit root tests in the presence of trend misspecification is...

In this paper, we address the issue of spurious correlation in the production of health in a systematic way. Spurious correlation entails the risk of linking health status to medical (and nonmedical) inputs when no links exist. This note first presents the bounds testing procedure as a method to...

The present paper introduces the Bi-parameter Smooth Transition Autoregressive (BSTAR) model that generalizes the LSTR2 model, see Terasvirta (1998). In contrast to the LSTR2 model, which features the symmetric transition function, the BSTAR model is characterized by the asymmetric transition...

This paper sets up a common unobserved factor model with smooth transition autoregressive dynamics. This model is compared to the already classical common factor model with regime-switching. Both models' in-sample and out-of-sample performance in terms of capturing and predicting the business...

This paper sets up a common unobserved factor model with smooth transition autoregressive dynamics. This model is compared to the already classical common factor model with regime-switching. Both models' in-sample and out-of-sample performance in terms of capturing and predicting the business...

This paper sets up a common unobserved factor model with smooth transition autoregressive dynamics. This model is compared to the already classical common factor model with regime-switching. Both models' in-sample and out-of-sample performance in terms of capturing and predicting the business...

The paper treats the issue of the decreasing volatility of the U.S. economy which has been observed since the mid-1980s. As a measure of volatility the residual variance of a composite economic indicator is used. This indicator is constructed as a common dynamic factor with Markov switching and...

The paper treats the issue of the decreasing volatility of the U.S. economy which has been observed since the mid-1980s. As a measure of volatility the residual variance of a composite economic indicator is used. This indicator is constructed as a common dynamic factor with Markov switching and...