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Studies in Nonlinear Dynamics & Econometrics

Ed. by Mizrach, Bruce

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Volume 24, Issue 1


Volume 24 (2020)

A model for ordinal responses with heterogeneous status quo outcomes

Andrei SirchenkoORCID iD: https://orcid.org/0000-0003-0567-4170
Published Online: 2019-04-10 | DOI: https://doi.org/10.1515/snde-2018-0059


The decisions to reduce, leave unchanged, or increase a choice variable (such as policy interest rates) are often characterized by abundant status quo outcomes that can be generated by different processes. The decreases and increases may also be driven by distinct decision-making paths. Neither conventional nor zero-inflated models for ordinal responses adequately address these issues. This paper develops a flexible endogenously switching model with three latent regimes, which create separate processes for interest rate hikes and cuts and overlap at a no-change outcome, generating three different types of status quo decisions. The model is not only favored by statistical tests but also produces economically more meaningful inference with respect to the existing models, which deliver biased estimates in the simulations.

This article offers supplementary material which is provided at the end of the article.

Keywords: MPC votes; ordinal responses; policy interest rate; regime switching; zero-inflated model

Article Note

The first draft of this paper was circulated in the proceedings of the 2nd Doctoral Workshop in Economic Theory and Econometrics (MOOD-2012) at Einaudi Institute for Economics and Finance in Rome in June 2012.


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About the article

Published Online: 2019-04-10

Funding Source: Global Development Network

Award identifier / Grant number: #R10-0221

Global Development Network, Grant Number: #R10-0221. Economics Education and Research Consortium, Grant Number: Zvi Griliches Excellence Award.

Citation Information: Studies in Nonlinear Dynamics & Econometrics, Volume 24, Issue 1, 20180059, ISSN (Online) 1558-3708, DOI: https://doi.org/10.1515/snde-2018-0059.

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