González, Andrés () (Banco de la República, Colombia, Departamento de modelos macroeconómicos) Teräsvirta, Timo () (CREATES, School of Economics and Management, University of Aarhus, and Department of Economic Statistics, Stockholm School of Economics)
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In this paper we introduce an autoregressive model with a deterministically shifting intercept. This implies that the model has a shifting mean and is thus nonstationary but stationary around a nonlinear deterministic component. The shifting intercept is defined as a linear combination of logistic transition functions with time as the transition variables. The number of transition functions is determined by selecting the appropriate functions from a possibly large set of alternatives using a sequence of specification tests. This selection procedure is a modification of a similar technique developed for neural network modelling by White (2006). A Monte Carlo experiment is conducted to show how the proposed modelling procedure and some of its variants work in practice. The paper contains two applications in which the results are compared with what is obtained by assuming that the time series used as examples may contain structural breaks instead of smooth transitions and selecting the number of breaks following the technique of Bai and Perron (1998).
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Length: 26 pages Date of creation: 27 Sep 2006 Date of revision:
22 May 2007 Publication status: Published in Studies in Nonlinear Dynamics and Econometrics, 2008. Handle: RePEc:hhs:hastef:0637
Note: This is the revised (May 2007) version of the paper. Contact details of provider: Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden Phone: +46-(0)8-736 90 00 Fax: +46-(0)8-31 01 57 Email: Web page: http://www.hhs.se/ More information through EDIRC
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