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Full-Text Articles in Social and Behavioral Sciences
Nonstationary Discrete Choice, Ling Hu, Peter C.B. Phillips
Nonstationary Discrete Choice, Ling Hu, Peter C.B. Phillips
Cowles Foundation Discussion Papers
This paper develops an asymptotic theory for time series discrete choice models with explanatory variables generated as integrated processes and with multiple choices and threshold parameters determining the choices. The theory extends recent work by Park and Phillips (2000) on binary choice models. As in this earlier work, the maximum likelihood (ML) estimator is consistent and has a limit theory with multiple rates of convergence ( n 3/4 and n 1 /4 ) and mixture normal distributions where the mixing variates depend on Brownian local time as well as Brownian motion. An extended arc sine limit law is given for …
Dynamics Of The Federal Funds Target Rate: A Nonstationary Discrete Choice Approach, Ling Hu, Peter C.B. Phillips
Dynamics Of The Federal Funds Target Rate: A Nonstationary Discrete Choice Approach, Ling Hu, Peter C.B. Phillips
Cowles Foundation Discussion Papers
We apply a discrete choice approach to model the empirical behavior of the Federal Reserve in changing the federal funds target rate, the benchmark of short term market interest rates in the US. Our methods allow the explanatory variables to be nonstationary as well as stationary. This feature is particularly useful in the present application as many economic fundamentals that are monitored by the Fed and are believed to affect decisions to adjust interest rate targets display some nonstationarity over time. The empirical model is determined using the PIC criterion (Phillips and Ploberger, 1996; Phillips, 1996) as a model selection …