Smooth transitions in macroeconomic relationships

Abstract

The purpose of this thesis is to explore the possibilities and advantages of describing macroeconomic relationships with a certain well-defined class of parametric nonlinear econometric models, called smooth transition regressions (STR). An STR model is a flexible nonlinear specification with a continuum of regimes. It is locally linear transitions from one extreme regime to another are determined by a function of a continuous variable, the transition variable.The thesis consists of four essays and the macroeconomic relationships that are considered are: Consumption, Money Demand and the Phillips Curve. The essays of this dissertation emphasise the importance of allowing for a flexible functional form when dealing with macroeconomic relationships.

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