In this paper, we investigate the instability in a self-exciting regime-switchingautoregressive model that is locally stable in each of its regimes respectively. It turnsout that the stability locally in each of the regimes is not sufficient to guarantee thestability of the model. The mechanism...

The objective of this paper is to apply the method developed in Garratt, Lee, Pesaran, and Shin (2000) to build a structural model for Germany with a transparent and theoretically coherent foundation. The modelling strategy consists of a set of long-run structural relationships suggested by...