Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/238884 
Year of Publication: 
2018
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 11 [Issue:] 3 [Publisher:] MDPI [Place:] Basel [Year:] 2018 [Pages:] 1-23
Publisher: 
MDPI, Basel
Abstract: 
This paper examines the steady state properties of the Threshold Vector Autoregressive model. Assuming that the trigger variable is exogenous and the regime process follows a Bernoulli distribution, necessary and sufficient conditions for the existence of stationary distribution are derived. A situation related to so-called 'locally explosive models', where the stationary distribution exists though the model is explosive in one regime, is analysed. Simulations show that locally explosive models can generate some of the key properties of financial and economic data. They also show that assessing the stationarity of threshold models based on simulations might well lead to wrong conclusions.
Subjects: 
asset price bubbles
explosive regimes
multivariate nonlinear time series
steady state distributions
TVAR models
JEL: 
C1
C3
C5
G1
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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