Structural change in macroeconomic time series: A complex systems perspective

We demonstrate that the process of generating smooth transitions can be viewed as a natural result of the filtering operations implied in the generation of discrete-time series observations from the sampling of data from an underlying continuous time process that has undergone a process of structural change. In order to focus discussion, we utilize the problem of estimating the location of abrupt shifts in some simple time series models. This approach will permit us to address salient issues relating to distortions induced by the inherent aggregation associated with discrete-time sampling of continuous time processes experiencing structural change. We also address the issue of how time irreversible structures may be generated within the smooth transition processes.