Threshold Switching Models | Switching Models in Econometrics, Part 2

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

- Use the regime-switching example series in the Econometrics Toolbox to get you started: https://bit.ly/3H1rheA

 Introduction

 Data Import and Visualization

 Defining threshold transitions

 Assembling the switching model

 Simulate and forecast data