Switching Models in Econometrics: Threshold Switching Models
From the series: Switching Models in Econometrics
This is the second video in a two-part series that shows how to model time series data in the presence of regime shifts in MATLAB® in this video, we use Threshold Switching Models from the Econometrics Toolbox™ to model inflation data across different inflationary regimes.
- Import Consumer Price Index data and visualize monthly U.S. inflation rate
- Set up ARIMA or vector auto-regressive sub models to describe the data in each of the inflationary, normal, and deflationary regimes
- Create a deterministic switching mechanism between different inflation states using threshold transition functionality in the Econometrics Toolbox
- Assemble the switching model using built-in functionality in the Econometrics Toolbox to switch between the sub models in different regimes
- Estimate model parameters, simulate the model over multiple paths and time periods, and forecast model means from current data
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