Business cycle non-linearities in UK consumption and production

By Nadir Öcal, D. Osborn. 2000

113 citations recorded by the source corpus.

This paper develops non-linear smooth transition autoregressive (STAR) models with two additive smooth transition components to capture the business cycle characteristics of UK real consumers' expenditure and industrial production. The results indicate consumption has essentially two business cycle regimes: recession and expansion. Industrial production, however, is characterized by the three regimes of recession, normal growth and high growth. The transitions describing recovery from recession are very similar for the two variables. Stochastic simulations illustrate the dynamic responses of these models and emphasize that they are locally linear. Our results also indicate that the two-transition STAR models have some forecast advantages over other specifications for periods of contraction. Copyright © 2000 John Wiley & Sons, Ltd.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/4000866f4041600199d05548ac8114f875dc115c

Citations in the corpus

• Nonlinear Dynamics and Structural Change in the U.S. Hog-Corn Cycle: A Time-Varying STAR Approach (2006, unknown): “STAR models have been used to model nonlinear features of business cycles for developed countries (Öcal and Osborn, 2000; Skalin and Teräsvirta, 1999; Teräsvirta and Anderson, 1992; van Dijk and Franses, 1999).”
• Nonlinearity and the permanent effects of recessions (2002, unknown): “Similarly, Tiao and Tsay (1994), van Dijk and Franses (1999), and Öcal and Osborn (2000) have estimated multiple regime threshold models in which one regime is a high growth phase following economic contractions.”