Since we all studied economics we touched on basiceconometrics.Some of you might ﬁnd this boring.
As government economists we often make predictionsabout certain outcomes using some econometric rela-tionships. These relationship are usually linear. But aswe live in a complex world many variables are not lin-ear (think of business cycles). Since there is a largeliterature on nonlinear models which can be scary formost of us, I restrict myself here to some simple non-linear models, namely Threshold Autoregressive Models(TAR).