Chapter

Nonlinear models in economic theory

Timo Teräsvirta, Dag Tjøstheim and W. J. Granger

in Modelling Nonlinear Economic Time Series

Published in print December 2010 | ISBN: 9780199587148
Published online May 2011 | e-ISBN: 9780191595387 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199587148.003.0002

Series: Advanced Texts in Econometrics

Nonlinear models in economic theory

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This chapter contains a number of examples of families of nonlinear models in economic theory. These include disequilibrium models that have been applied to modelling markets with rationing or sticky prices, and various labour market models that generate nonlinearities in employment or unemployment. Modelling exchange rates fluctuating within boundaries set by the central bank that define the so‐called target zone of the exchange rate is also discussed. Production theory, in which nonlinear models are common, constitutes the last example. For all of these four areas, examples of application of these models to time series or cross‐section data are described.

Keywords: disequilibrium model; exchange rate; production function; target zone model; unemployment rate

Chapter.  5378 words.  Illustrated.

Subjects: Econometrics and Mathematical Economics

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