This paper reviews and documents methodology for fitting hidden Markov switching models to New Zealand GDP data. A primary objective is to better understand the utility of these methods for modelling growth and volatility regimes present in the New Zealand data and their interaction. Properties of the models are developed together with a description of the estimation methods, including use of t...

The dynamic and complex relationship among economic variables has attracted the researchers, policy makers and business people alike. This study is an attempt to test the dynamic relationship among gold price, stock returns, exchange rate and oil price. All these variables have witnessed significant changes over time and hence, it is absolutely necessary to validate the relationship periodicall...

GARCH (1,1) models are widely used for modelling processes with time varying volatility. These include financial time series, which can be particularly heavy tailed. In this paper, we propose a logtransform-based least squares estimator (LSE) for the GARCH (1,1) model. The asymptotic properties of the LSE are studied under very mild moment conditions for the errors. We establish the consistency...

This paper employs advanced time series methods to identify the dynamic properties of three hostage taking series. The immediate and long run multipliers of three covariates—successful past negotiations, violent ends, and deaths—are identified. Each hostage series responds differently to the covariates. Past concessions have the strongest impact on generating future kidnapping events, supportin...

Tests of stationarity are routinely applied to highly autocorrelated time series. Following Kwiatkowski et al. (J. Econom. 54 (1992) 159), standard stationarity tests employ a rescaling by an estimator of the long-run variance of the (potentially) stationary series. This paper analytically investigates the size and power properties of such tests when the series are strongly autocorrelated in a ...

Two types of state-switching models for U.S. real output have been proposed: models that switch randomly between states (as in Hamilton (1989)) and models that switch states deterministically, as in the threshold autoregressive model of Potter (1995). These models have been justified primarily on how well they fit the sample data, yielding statistically significant estimates of the model coeffi...

This paper examines the hypothesis that both stock returns and volatility are asymmetrical functions of past information from the US market. By employing a double-threshold GARCH model to investigate six major index-return series, we find strong evidence supporting the asymmetrical hypothesis of stock returns. Specifically, negative news from the US market will cause a larger decline in a natio...

This paper considers a state space model with integrated latent variables. The model provides an effective framework to specify, test and extract common stochastic trends for a set of integrated time series. The model can be readily estimated by the standard Kalman filter, whose asymptotics are fully developed in the paper. In particular, we establish the consistency and asymptotic mixed normal...

In this paper, a synthesis of the recently advanced Lagrange multiplier (LM)-based tests for the null of no cointegration which account for different patterns of breaks in the cointegrating relationship is provided. The limiting distributions of the test statistics are not only invariant to an intercept break and a break in the cointegrating vector, but are also invariant to a trend break in a ...

This study shows that annual output data of the G7 countries in the twentieth century are better characterized as transitory deviations from a (shifting) growth trend than as integrated processes. Furthermore, I find no two countries share common business cycles. JEL classification: C22, E32, 057