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Testing nonlinearity: Decision rules for selecting between logistic and exponential STAR models

Author

Listed:
  • Álvaro Escribano

    (Department of Economics, Universidad Carlos III de Madrid, c/ Madrid 126, Madrid 28903, Spain Department of Economics, University of California, One Shields Avenue, Davis, CA 95616-8578, USA)

  • Oscar Jordá

    (Department of Economics, Universidad Carlos III de Madrid, c/ Madrid 126, Madrid 28903, Spain Department of Economics, University of California, One Shields Avenue, Davis, CA 95616-8578, USA)

Abstract

A new LM specification procedure to choose between Logistic and Exponential Smooth Transition Autoregressive (STAR) models is introduced. The new decision rule has better properties than those previously available in the literature when the model is ESTAR and similar properties when the model is LSTAR. A simple natural extension of the usual LM-test for linearity is introduced and evaluated in terms of power. Monte-Carlo simulations and empirical evidence are provided in support of our claims.

Suggested Citation

  • Álvaro Escribano & Oscar Jordá, 2001. "Testing nonlinearity: Decision rules for selecting between logistic and exponential STAR models," Spanish Economic Review, Springer;Spanish Economic Association, vol. 3(3), pages 193-209.
    • Handle: RePEc:spr:specre:v:3:y:2001:i:3:p:193-209
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    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; Diffusion Processes

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