1/2006 Nektarios Aslanidis. Business cycle regimes in CEECs production: A threshold SUR approach

Working Papers of Eesti Pank. No 1, 2006

The aim of this paper is to study economic activity in CEECs and to look at the transmission of economic activity between the euro area and CEECs. Econometric techniques appropriate for a threshold seemingly unrelated regressions specification are developed to take account of factors that are common to all CEECs. This methodology also allows for asymmetries in the activity of the CEECs governed by the overall euro area activity. The results show slow growth for most CEECs when the euro area economy decelerates, but high growth when the euro area economy grows.
JEL Code: C50, E32
Key words: threshold SUR, asymmetry, business cycles

*  University of Crete and University of Monash, Department of Economics. This research was conducted during the five-month period when I was visiting Eesti Pank, and the hospitality of the research department during my stay is gratefully acknowledged. Comments from seminar participants at Eesti Pank, Stockholm School of Economics, University of Sydney and Monash University are greatly appreciated. am also grateful to Robert Bartels, David G Mayes, Martti Randveer and Timo Teräsvirta for useful suggestions and comments. Any remaining errors are exclusively mine.

Author's e-mail address: n.aslanidis [at] econ.soc.uoc.gr

The views expressed are those of the author and do not necessarily represent the official views of Eesti Pank.

Contents

1. Introduction
2. Methodology
2.1. Model
2.2. Estimation
2.3. Testing for threshold SUR
3. Nonlinear modelling of industrial production in CEECs
3.1. Data
3.2. Discussion of the estimated models
4. Conclusions
References
Appendices
Appendix 1. One-month difference of the logarithm of seasonally adjusted industrial production
Appendix 2. Twelwe-month difference of the logarithm of seasonally adjusted euro area industrial production
Appendix 3. Log likelihood function from the threshold SUR 1 versus candidate threshold values
Appendix 4. Log likelihood function from the threshold SUR 2 versus candidate threshold values
Appendix 5. Linear SUR Specification
Appendix 6. Correlation Matrix of Residuals from Linear SUR Specification
Appendix 7. Threshold SUR Specification 1
Appendix 8. Correlation Matrix of Residuals from Linear SUR Specification 1
Appendix 9. Threshold SUR Specification 2
Appendix 10. Correlation Matrix of Residuals from Threshold SUR Specification 2

Business Cycle Regimes in CEECs Production: A Threshold SUR Approach, Working Papers of Eesti Pank No 1, 2006 (PDF*)

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