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Specification, Estimation and Evaluation of Vector Smooth Transition Autoregressive Models with Applications

  • Timo Teräsvirta

    ()

    (Aarhus University and CREATES)

  • Yukai Yang

    ()

    (CORE, Université catholique de Louvain and CREATES)

We consider a nonlinear vector model called the logistic vector smooth transition autoregressive model. The bivariate single-transition vector smooth transition regression model of Camacho (2004) is generalised to a multivariate and multitransition one. A modelling strategy consisting of specification, including testing linearity, estimation and evaluation of these models is constructed. Nonlinear least squares estimation of the parameters of the model is discussed. Evaluation by misspecification tests is carried out using tests derived in a companion paper. The use of the modelling strategy is illustrated by two applications. In the first one, the dynamic relationship between the US gasoline price and consumption is studied and possible asymmetries in it considered. The second application consists of modelling two well known Icelandic riverflow series, previously considered by many hydrologists and time series analysts. JEL Classification: C32, C51, C52

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Paper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2014-08.

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Length: 44
Date of creation: 03 2014
Date of revision:
Handle: RePEc:aah:create:2014-08
Contact details of provider: Web page: http://www.econ.au.dk/afn/

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  1. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  2. Watson, Mark W & Engle, Robert F, 1985. "Testing for Regression Coefficient Stability with a Stationary AR(1) Alternative," The Review of Economics and Statistics, MIT Press, vol. 67(2), pages 341-46, May.
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