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On SETAR non- linearity and forecasting

We consider the usefulness of the two-regime SETAR model for out-of-sample forecasting, and compare it with a linear AR model. A range of newly-developed forecast evaluation techniques are employed. Our simulation results show that time-series data need to exhibit a substantial degree of non-linearity before the SETAR model is favoured on some of these criteria. We find only weak evidence that a SETAR model of US GNP provides more accurate forecasts than a linear AR model.

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File URL: http://repub.eur.nl/pub/1567/feweco19990331092909.pdf
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Paper provided by Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute in its series Econometric Institute Research Papers with number EI 9914-/A.

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Date of creation: 12 Mar 1999
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Handle: RePEc:ems:eureir:1567
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  14. Chatfield, Chris, 1993. "Calculating Interval Forecasts," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(2), pages 121-35, April.
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  18. Pfann, Gerard A. & Schotman, Peter C. & Tschernig, Rolf, 1996. "Nonlinear interest rate dynamics and implications for the term structure," Journal of Econometrics, Elsevier, vol. 74(1), pages 149-176, September.
  19. Michael P. Clements & Hans-Martin Krolzig, 1998. "A comparison of the forecast performance of Markov-switching and threshold autoregressive models of US GNP," Econometrics Journal, Royal Economic Society, vol. 1(Conferenc), pages C47-C75.
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  22. David Peel & Alan Speight, 1994. "Testing for non-linear dependence in inter-war exchange rates," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(2), pages 391-417, June.
  23. Clements, Michael P. & Taylor, Nick, 2001. "Bootstrapping prediction intervals for autoregressive models," International Journal of Forecasting, Elsevier, vol. 17(2), pages 247-267.
  24. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-30, March.
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