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Theory and Applications of TAR Model with Two Threshold Variables

  • Chen, Haiqiang
  • Chong, Terence Tai Leung
  • Bai, Jushan

A growing body of threshold models has been developed over the past two decades to capture the nonlinear movement of financial time series. Most of these models, however, contain a single threshold variable only. In many empirical applications, models with two or more threshold variables are needed. This paper develops a new threshold autoregressive model which contains two threshold variables. A likelihood ratio test is proposed to determine the number of regimes in the model. The finite-sample performance of the estimators is evaluated and an empirical application is provided.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 54527.

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Date of creation: 01 Jan 2012
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Publication status: Published in Econometric Reviews 31.2(2012): pp. 142-170
Handle: RePEc:pra:mprapa:54527
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