Inference in TAR Models
AbstractA distribution theory is developed for least-squares estimates of the threshold in Threshold Autoregressive (TAR) models. We find that if we let the threshold effect (the difference in slopes between the two regimes) become small as the sample size increases, then the asymptotic distribution of the threshold estimator is free of nuisance parameters (up to scale). Similarly, the likelihood ratio statistic for testing hypotheses concerning the unknown threshold is asymptotically free of nuisance parameters. These asymptotic distributions are nonstandard, but are available in closed form, so critical values are readily available. To illustrate this theory, we report an application to the U.S. unemployment rate. We find statistically significant threshold effects.
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Bibliographic InfoArticle provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.
Volume (Year): 2 (1997)
Issue (Month): 1 (April)
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Web page: http://www.degruyter.com
Other versions of this item:
- Tom Doan, . "THRESHTEST: RATS procedure to perform Hansen's Test for Threshold Break," Statistical Software Components RTS00210, Boston College Department of Economics.
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