Nonlinear Time Series Models

Abstract

Most of the time series models discussed in the previous chapters are linear time series models. Although they remain at the forefront of academic and applied research, it has often been found that simple linear time series models usually leave certain aspects of economic and financial data unexplained. Since economic and financial systems are known to go through both structural and behavioral changes, it is reasonable to assume that different time series models may be required to explain the empirical data at different times. This chapter introduces some popular nonlinear time series models that have been found to be effective at modeling nonlinear behavior in economic and financial time series data.