|fulltext etc.||no fulltext attached|
In this paper we propose a smooth transition tree model for both
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).
short-term interest rate, regression tree, smooth
transition, conditional variance, bagging, asymptotic theory.
|kind of paper||journal article|
|date of appearance||9-2011|
|journal||Journal of Applied Econometrics|
|publisher||Wiley (Chichester UK)|
|volume of journal||26|
|number of issue||6|
|citation||Audrino, F., & Medeiros, M. C. (2011). Modeling and forecasting short-term interest rates: The benefits of smooth regimes, macroeconomic variables, and bagging. Journal of Applied Econometrics, 26(6), 999-1022, DOI:10.1002/jae.1171.|