Focus on non-linearity can improve macro estimates, research finds
Accounting for non-linearity can improve the probabilistic assessment of macroeconomic outlooks, according to a new Czech National Bank working paper.
In The Effect of Non-Linearity Between Credit Conditions and Economic Activity on Density Forecasts, Michal Franta focuses on the relationship between credit markets and the rest of the economy. The possible non-linearity of this relationship is captured by a threshold vector autoregressive model estimated on the US data using Bayesian methods.
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