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The Vector Floor and Ceiling Model

By Gary Koop and Simon M. Potter

Abstract

This paper motivates and develops a nonlinear extension of the Vector\ud Autoregressive model which we call the Vector Floor and Ceiling model. Bayesian and\ud classical methods for estimation and testing are developed and compared in the context of\ud an application involving U.S. macroeconomic data. In terms of statistical significance both\ud classical and Bayesian methods indicate that the (Gaussian) linear model is inadequate.\ud Using impulse response functions we investigate the economic significance of the statistical\ud analysis. We find evidence of strong nonlinearities in the contemporaneous relationships\ud between the variables and milder evidence of nonlinearity in the conditional mean

Topics: Nonlinearity, Bayesian, Vector Autoregression
Publisher: Dept. of Economics, University of Leicester
Year: 2000
OAI identifier: oai:lra.le.ac.uk:2381/4634

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Citations

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