Determining the Number of Regimes in a Threshold Autoregressive Model Using Smooth Transition Autoregressions
In this paper we propose a method for determining the number of regimes in threshold autoregressive models using smooth transition autoregression as a tool. As the smooth transition model is just an approximation to the threshold autoregressive one, no asymptotic properties are claimed for the proposed method. Tests available for testing the adequacy of a smooth transition autoregressive model are applied sequentially to determine the number of regimes. A simulation study is performed in order to find out the finite-sample properties of the procedure and to compare it with two other procedures available in the literature. We find that our method works reasonably well for both single and multiple threshold models.
|Date of creation:||11 Jan 2005|
|Date of revision:||11 Feb 2005|
|Publication status:||Published in Econometrics Journal, 2006, pages 472-491.|
|Note:||This is an early version of the paper published under a different title in Econometrics Journal 9, 472-491 (2006).|
|Contact details of provider:|| Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden|
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