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Threshold integrated moving average models: does size matter? maybe so

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  • Martínez, Oscar

Abstract

The aim of this paper is to identify permanent and transitory shocks. This identification is done according to the size of the shocks or the size of some other important economic variable. In order to be able to carry this identification scheme on, we introduce a new class of threshold models: threshold integrated moving average models (TIMA). These are integrated models with a unit root in the moving average of one regime and an invertible moving average in the other regime. The former regime corresponds to transitory shocks,while the latter corresponds to permanent shocks. The paper analyzes the impulse response function generated by TIMA models and its invertibility. Consistency and asymptotic normality of least squares estimators are established and hypothesis tests for TIMA models are developed. The paper concludes with an application to exchange rates and stock market prices.

Suggested Citation

  • Martínez, Oscar, 2003. "Threshold integrated moving average models: does size matter? maybe so," DE - Documentos de Trabajo. Economía. DE 16008, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:derepe:16008
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    Cited by:

    1. Catherine Bruneau & Amine Lahiani, 2006. "Estimation d'un modèle TIMA avec asymétrie contemporaine par inférence indirecte," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 142(IV), pages 479-500, December.
    2. Gonzalo, Jesus & Martinez, Oscar, 2006. "Large shocks vs. small shocks. (Or does size matter? May be so.)," Journal of Econometrics, Elsevier, vol. 135(1-2), pages 311-347.
    3. Catherine Bruneau & Amine Lahiani, 2006. "Estimation d'un modèle TIMA avec asymétrie contemporaine par inférence indirecte," Working Papers hal-04138874, HAL.
    4. González Gómez, Andrés, 2004. "A smooth permanent surge process," SSE/EFI Working Paper Series in Economics and Finance 572, Stockholm School of Economics.

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    More about this item

    Keywords

    Asymmetries;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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