Typology of Nonlinear Time Series Models

This paper attempts to provide a comprehensive review of nonlinear time series models, starting with the rationale for such models, their superiority over their linear counterparts, and issues surrounding their analysis especially in terms of the simultaneous examination of nonlinear and nonstationary properties of the data. The study provides a detailed typology of various univariate nonlinear time series models, the aspects that it helps capture in data and their estimation procedures. The paper then provides an exposition of the concept of nonlinear cointegration in a multivariate context and some of the issues therein. As an illustrative example, the study estimates a SETAR model for the Indian money multiplier and provides a brief analysis. We conclude with the relevance and applicability of these models in further understanding the dynamics in economic data.