Determining the Number of Regimes in a Threshold Autoregressive Model Using Smooth Transition Autoregressions
AbstractIn this paper we propose a method for determining the number of regimes in threshold autoregressive models using smooth transition autoregression as a tool. As the smooth transition model is just an approximation to the threshold autoregressive one, no asymptotic properties are claimed for the proposed method. Tests available for testing the adequacy of a smooth transition autoregressive model are applied sequentially to determine the number of regimes. A simulation study is performed in order to find out the finite-sample properties of the procedure and to compare it with two other procedures available in the literature. We find that our method works reasonably well for both single and multiple threshold models.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 578.
Length: 28 pages
Date of creation: 11 Jan 2005
Date of revision: 11 Feb 2005
Publication status: Published in Econometrics Journal, 2006, pages 472-491.
Note: This is an early version of the paper published under a different title in Econometrics Journal 9, 472-491 (2006).
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Model specification; model selection criterion; nonlinear modelling; sequential testing; switching regression;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-01-23 (All new papers)
- NEP-ECM-2005-01-23 (Econometrics)
- NEP-ETS-2005-01-23 (Econometric Time Series)
- NEP-FIN-2005-01-23 (Finance)
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