Macroeconomic Dynamics

Table of Contents - April 2012 - Volume 16, Supplement S1 (Nonlinear Dynamics in Equilibrium Models)  

Articles

BOUNDING TAIL PROBABILITIES IN DYNAMIC ECONOMIC MODELS

John Stachurskia1 c1

a1 Australian National University

Abstract

This paper provides conditions for bounding tail probabilities in stochastic economic models in terms of their transition laws and shock distributions. Particular attention is given to conditions under which the tails of stationary equilibria have exponential decay. By way of illustration, the technique is applied to a threshold autoregression model of exchange rates.

Keywords:

  • Tail Events;
  • Ergodicity;
  • Stationary Distributions

Correspondence:

c1 Address correspondence to: John Stachurski, Research School of Economics, Australian National University, ACT 0200, Australia; e-mail: john.stachurski@anu.edu.au.

Footnotes

The author thanks Vance Martin, Lawrence Uren and Makoto Yano for many helpful comments. This research paper also benefitted from financial support by the Australian Research Council.