Consistent Model Specification Tests Against Smooth Transition Alternatives
AbstractIn this paper we develop tests of functional form that are consistent against a class of nonlinear "smooth transition" models of the conditional mean. Our method is an extension of the consistent model specification tests developed by Bierens (1990), de Jong (1996) and Bierens and Ploberger (1997), provides maximal power against nonlinear smooth transition ARX specifications, and is consistent against any deviation from the null hypothesis. Of separate interest, we provide substantial detail regarding when and whether Bierens-type tests are asymptotically degenerate. In a simulation experiment in which all parameters are randomly selected, and a linear AR null model is selected by minimizing the AIC, the proposed test has power nearly identical to a most powerful test for true STAR processes, and dominates popular tests.
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Bibliographic InfoPaper provided by EconWPA in its series Econometrics with number 0402004.
Length: 35 pages
Date of creation: 05 Feb 2004
Date of revision: 01 Mar 2004
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smooth transition; consistent test; nondegenerate test; nonlinear; neural networks.;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-08 (All new papers)
- NEP-ECM-2004-02-08 (Econometrics)
- NEP-ETS-2004-02-08 (Econometric Time Series)
- NEP-RMG-2004-02-08 (Risk Management)
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