@article{Error-Correction:888,
      recid = {888},
      author = {Liu, Ying},
      title = {Modelling Mortgage Rate Changes with a Smooth Transition  Error-Correction Model},
      publisher = {Bank of Canada},
      address = {2001},
      pages = {1 online resource (vi, 23 pages)},
      abstract = {This paper uses a smooth transition error-correction model  (STECM) to model the one-year and five-year mortgage rate  changes. The model allows for a non-linear adjustment  process of mortgage rates towards their long-run  equilibrium. We also introduce time-varying thresholds into  the standard STECM specification, to capture the gradual  structural changes in the error-correction term. We find  that the STECM, whether with fixed or time-varying  thresholds, yields better in-sample fit and lower forecast  errors than the linear benchmark and univariate models. Our  estimation results indicate non-linearities in the  adjustment process of mortgage rates towards their long-run  equilibria. In particular, we find that mortgage rates  respond more significantly to a large than to a small  disequilibrium. The improvement of the STECMs in  forecasting is statistically significant over the  univariate models, but insignificant over the linear  model.},
      url = {http://www.oar-rao.bank-banque-canada.ca/record/888},
      doi = {https://doi.org/10.34989/swp-2001-23},
}