Threshold Switching Models | Switching Models in Econometrics

This is the second video in a two-part series that shows how to model time series data in the presence of regime shifts in MATLAB^® in this video, we use Threshold Switching Models from the Econometrics Toolbox™ to model inflation data across different inflationary regimes.

Highlights:

• Import Consumer Price Index data and visualize monthly U.S. inflation rate
• Set up ARIMA or vector auto-regressive sub models to describe the data in each of the inflationary, normal, and deflationary regimes
• Create a deterministic switching mechanism between different inflation states using threshold transition functionality in the Econometrics Toolbox
• Assemble the switching model using built-in functionality in the Econometrics Toolbox to switch between the sub models in different regimes
• Estimate model parameters, simulate the model over multiple paths and time periods, and forecast model means from current data