A multi-level panel smooth transition autogressive model for US manufacturing sectors
We introduce a multi-level smooth transition model for a panel of time series, which can be used to examine the presence of common nonlinear business cycle features across many variables. The model is positioned in between a fully pooled model, which imposes such common features, and a fully heterogeneous model, which allows for unrestricted nonlinearity. We introduce a second-stage model linking the parameters that determine the timing of the switches between business cycle regimes to observable explanatory variables, thereby allowing for lead-lag relationships across panel members. We discuss representation, estimation by concentrated simulated maximum likelihood and inference. We illustrate our model using quarterly industrial production in 19 US manufacturing sectors, and document that there are subtle differences across sectors in leads and lags for switches between business cycle recessions and expansions.
|Keywords||Econometrics, Economic indicators, Economic models, Manufacturing, Studies, business cycles, non-linearity, panel of time series|
|JEL||Models with Panel Data (jel C23), Model Construction and Estimation (jel C51), Business Fluctuations; Cycles (jel E32)|
|Persistent URL||dx.doi.org/10.1002/jae.822, hdl.handle.net/1765/13409|
|Journal||Journal of Applied Econometrics|
Fok, D, van Dijk, D.J.C, & Franses, Ph.H.B.F. (2005). A multi-level panel smooth transition autogressive model for US manufacturing sectors. Journal of Applied Econometrics, 20(6), 811–827. doi:10.1002/jae.822