Department of Economics and Finance

University of Alabama

Tuscaloosa, AL 35487

ph: 2053488972

wenders

**Pretesting For Multi-Step Ahead Forecasts with STAR Models (with Razvan Pascalau)***International Journal of Forecasting***31(2),****2015. pp. 473-87.**It is well known that a linear model may forecast better than a nonlinear one, even when the nonlinear model is consistent with the actual data-generating process. We propose a simple pretest to help determine whether it is worthwhile to forecast a series using a

*STAR*model. In particular, we extend Teräsvirta’s in-sample test for*LSTAR*and*ESTAR*behavior to multistep-ahead out-of-sample forecasts. We illustrate the pretest using real exchange rates of various OECD countries.### The Asymmetric Effects of Uncertainty on Macroeconomic Activity (with Paul Jones)

*Macroeconomic Dynamics. 2016, 1-28.*

available on http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=10099820&fileId=S1365100514000807We estimate a number of macroeconomic variables as logistic smooth transition autoregressive(LSTAR) processes with uncertainty as the transition variable. For a number of important macroeconomic variables, we show (i) a positive shock to uncertainty has a greater effect than a negative shock, and (ii) the effect of the uncertainty shock is highly dependent onthe state of the economy. Hence, the usual linear estimates concerning the consequences ofuncertainty are underestimated in circumstances such as the recent financial crisis.

Data Code(Figs 1 to 4) Code(Figs 6,7,8) Code(Section 5.2 and Fig 5)

### The Taylor Rule and Opportunistic Monetary Policy (with H. Bunzel).

*Journal of Money, Credit and Banking*, Vol. 42, No. 5, August 2010.We show that the Taylor rule should be formulated as a threshold process such that the Federal Reserve acts more aggressivelyvin some circumstances than in others. Specifically, we find that a modified threshold modelthat is consistent with “opportunistic” monetary policy.

### An Historical Analysis of the Taylor Curve(with Eric Olson)

*Journal of Money, Credit and Banking*Vol. 44, No. 7, October 2012. 1285-99Taylor (1979) shows that there is a permanent tradeoff between the volatility of the output gapand the volatility of inflation. However, Friedman (2006) points out that it is more likely to serve as an efficiency locusthat can be used to gauge the appropriateness of monetary policy. Using data from 1875 onward,we examine the efficiency of U.S. monetary policy by measuring the orthogonal distancebetween the observed volatilities of the output gap and inflation from the Taylor curve.

*Sources of the Great Moderation: A Time-Series Analysis of GDP Subsectors* (with Jun Ma).*Journal of Economic Dynamics and Control*. Vol 35, (1), 2011, pp. 67–79We trace the timing of the so-called “Great Moderation” across many subsectors of the economy. We find that the interest rate sensitive sectors generally experience a much earlier volatility decline than other large sectors of the economy. The changes in Federal Reserve stabilization policies that occurred during the early 1980s support the view that improved monetary policy played an important role in stabilizing real economic activity.

### Unit Root Tests and Asymmetric Adjustment with an Example of the Term-Structure of Interest Rates. (with Clive Granger). J

*ournal of Business and Economic Statistics. 16, 1988, pp. 304-11.*This article develops critical values to test the null hypothesis of a unit root against the alternative of stationarity with asymmetric adjustment. Specific attention is paid to threshold and momentum threshold autoregressive processes. The use of the tests is illustrated using the term structure of interest rates. Also see the first Programming Manual for more details.

### Cointegration and Threshold Adjustment. (with Pierre Siklos).

*Journal of Business and Economic Statistics*19, 2001. pp. 166–76. Generalizes the Enders-Granger test to allow for threshold cointegration.

Copyright 2014 Applied Econometric Time Series. All rights reserved.

Department of Economics and Finance

University of Alabama

Tuscaloosa, AL 35487

ph: 2053488972

wenders