In this article we propose a multivariate dynamic probit model. Our model can be viewed as a nonlinear VAR model for the latent variables associated with correlated binary time-series data. To estimate it, we implement an exact maximum likelihood approach, hence providing a solution to the problem generally encountered in the formulation of multivariate probit models. Our framework allows us to study the predictive relationships among the binary processes under analysis. Finally, an empirical study of three financial crises is conducted.
|Title of host publication||VAR Models in Macroeconomics — New Developments and Applications: Essays in Honor of Christopher A. Sims|
|Editors||T.B. Fomby, L. Kilian, A. Murphy|
|Publisher||Emerald Group Publishing Limited|
|Number of pages||32|
|Publication status||Published - 1 Jan 2013|
|Series||Advances in Econometrics|
Candelon, B., Dumitrescu, E-I., Hurlin, C., & Palm, F. C. (2013). Multivariate dynamic probit models: an application to financial crises mutation. In T. B. Fomby, L. Kilian, & A. Murphy (Eds.), VAR Models in Macroeconomics — New Developments and Applications: Essays in Honor of Christopher A. Sims (pp. 395-427). Emerald Group Publishing Limited. Advances in Econometrics, No. 32 https://doi.org/10.1108/S0731-9053(2013)0000031011