Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/176053 
Year of Publication: 
2010
Series/Report no.: 
Texto para discussão No. 570
Publisher: 
Pontifícia Universidade Católica do Rio de Janeiro (PUC-Rio), Departamento de Economia, Rio de Janeiro
Abstract: 
In this paper we propose a smooth transition tree model for both the conditional mean and variance of the short-term interest rate process. The estimation of such models is addressed and the asymptotic properties of the quasi-maximum likelihood estimator are derived. Model specification is also discussed. When the model is applied to the US short-term interest rate we find (1) leading indicators for inflation and real activity are the most relevant predictors in characterizing the multiple regimes’ structure; (2) the optimal model has three limiting regimes. Moreover, we provide empirical evidence of the power of the model in forecasting the first two conditional moments when it is used in connection with bootstrap aggregation (bagging).
Subjects: 
short-term interest rate
regression tree
smooth transition
conditional variance
bagging
asymptotic theory
Document Type: 
Working Paper

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