Estimation of the continuous piecewise linear model and macroeconomic applications
Australian Research Council (ARC)
ARC Discovery Project
Start / End Date: 2012 to 2015
Professor Rodney Strachan, ARC Discovery Project DP120103601
The project consists of two components. The contribution of the first component is to develop methods to estimate the continuous piecewise linear model (CPLM) and to conduct inference on the model. The contribution of the second component is to use the CPLM and the new inferential techniques to analyse a number of macroeconomic applications where non-linearities and threshold effects give rise to kinked functions. Examples of these applications are the estimation of (i) non-linear monetary policy reaction functions, (ii) monetary and fiscal policy multipliers, (iii) the pass-through of exchange rate and international commodity prices, and (iv) the threshold effects of inflation and resource intensity on growth.