Germany is generally regarded as the nominal anchor for Europe. Its participation is the sine qua non of EMU. It has been the largest net contributor to EU finances, the leading proponent of greater economic and political union, and the leading example of the virtues of fiscal and monetary...

Smooth-transition autoregressive (STAR) models have proven to be worthy competitors of Markov-switching models of regime shifts, but the assumption of a time-invariant threshold level does not seem realistic and it holds back this class of models from reaching their potential usefulness. Indeed,...

Smooth-transition autoregressive (STAR) models have proven to be worthy competitors of Markov-switching models of regime shifts, but the assumption of a time-invariant threshold level does not seem realistic and it holds back this class of models from reaching their potential usefulness. Indeed,...

Smooth-transition autoregressive (STAR) models, competitors of Markov-switching models, are limited by an assumed time-invariant threshold level. We augment the STAR model with a time-varying threshold that can be interpreted as a 'tipping level' where the mean and dynamics of the VAR shift....