Retrieving the vanishing liquidity effect—a threshold vector autoregressive model

Shen, Chung‐Hua; Chiang, Thomas C.

doi:10.1016/s0148-6195(98)00021-6

Cited by 15 publications

(6 citation statements)

References 29 publications

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“…Classical estimation of parameters in the threshold class of models is usually done by a least-squares method with r and d prefixed (Tong, 1990). Estimates of r and d are then determined by using information criteria such as AIC and BIC (Tsay, 1998;Shen and Chiang, 1999). The shortcoming of this sampling approach is that by fixing r and d in advance, before estimating other parameters by least squares, the uncertainty of r and d cannot be taken into account when performing statistical inference for other parameters.…”

Section: Estimation Proceduresmentioning

confidence: 99%

Returns and Volatility Asymmetries in Global Stock Markets

Chiang

Chen

2002

SSRN Journal

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Section: Estimation Proceduresmentioning

confidence: 99%

Returns and Volatility Asymmetries in Global Stock Markets

Chiang

Chen

2002

SSRN Journal

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“…Therefore, the threshold variable may be composed of lagged values of the inflation rate or its moving average. Following Tsay (1998), Shen and Chiang (1999) and Balke (2000), a threshold VAR can be interpreted as follows:…”

Section: Analytical Frameworkmentioning

confidence: 99%

“…The threshold autoregression approach has been applied to many studies. Shen and Chiang (1999) use a threshold VAR model in which data is subdivided into low and high inflation regimes. They hypothesize that the interest rate responds inversely to increased monetary growth in a low inflation regime and positively to increased monetary growth in a high inflation regime.…”

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confidence: 99%

What Causes China's High Inflation? A Threshold Structural Vector Autoregression Analysis

Guo

2013

China and World Economy

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China's astonishing economic growth implies a necessity to understand its inflation. The present paper employs threshold nonrecursive structural vector autoregression analysis to explore the asymmetric effects of macro-variables on inflation in low and high inflation regimes. The empirical evidence demonstrates, first, that the reactions of inflation to various shocks are inflation-regime-dependent and asymmetric. Second, monetary policy influences China's high inflation and adjusting the domestic interest rate in China may be an effective way to control inflation in a high inflation regime, but not in a low inflation regime. In a high inflation regime, a high inflation rate may cause the macro-policy authorities to increase the domestic interest rate, in an attempt to stabilize high inflation. Third, contrary to expectations, the world oil price is not a strong cost-push factor in a low inflation regime. Oil price increases may increase inflation in a high inflation regime, but there is no such obvious effect in a low inflation regime. Finally, China's nominal effective exchange rate influences inflation in both low and high inflation regimes. A nominal effective exchange rate appreciation might be effective in controlling domestic inflation in both regimes.

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“…Still, the model's implications are consistent with a number of empirical findings. For example, using a threshold VAR model, Shen and Chiang (1999) investigate the nonlinear response of interest rates to monetary shocks. Their results strongly support threshold behavior in that the liquidity effect is significant and persistent for low-inflation but insignificant for high-inflation regimes.…”

Section: Endogenous Segmentation Modelmentioning

confidence: 99%

Endogenously Segmented Asset Market in an Inventory-Theoretic Model of Money Demand

Chiu

2012

Macroecon. Dynam.

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This paper studies the effects of monetary policy in an inventory-theoretic model of money demand. In this model, agents keep inventories of money, despite the fact that money is dominated in rate of return by interest-bearing assets, because they must pay a fixed cost to transfer funds between the asset market and the goods market. In contrast to exogenous segmentation models in the literature, the timing of money transfers is endogenous. As a result, the model endogenizes the degree of market segmentation as well as the magnitudes of liquidity effects, price sluggishness, and the variability of velocity. I first show that the endogenous segmentation model can generate the positive long-run relationship between money growth and velocity observed in the data, which the exogenous segmentation model fails to capture. I also show that the short-run effects of money shocks on prices, inflation, and nominal interest rates are not robust.

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Retrieving the vanishing liquidity effect—a threshold vector autoregressive model

Cited by 15 publications

References 29 publications

Returns and Volatility Asymmetries in Global Stock Markets

Returns and Volatility Asymmetries in Global Stock Markets

What Causes China's High Inflation? A Threshold Structural Vector Autoregression Analysis

Endogenously Segmented Asset Market in an Inventory-Theoretic Model of Money Demand

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