SSE/EFI Working Paper Series in Economics and Finance
Modelling Economic Relationships with Smooth Transition Regressions
Abstract: This paper has been prepared for Handbook of Applied
Economic Statistics, edited by David Giles and Aman Ullah. It considers a
particular class of single-equation nonlinear multivariate models called
smooth transition regression (STR) models. Inference in these models,
including testing linearity against STR and testing Granger noncausality,
is discussed. A modelling cycle, consisting of the specification,
estimation, and evaluation of these models is presented and its different
stages considered in detail. Model encompassing also receives attention.
Furthermore, the chapter contains a previously unpublished empirical
application of the STR model to modelling UK housing price expectations.
This example illustrates the workings of the modelling cycle and possible
usefulness of the STR model in dynamic macroeconomic modelling.
Keywords: Causality; econometric modelling; linearity test; misspecification test; nonlinear model; structural change; (follow links to similar papers)
JEL-Codes: C20; C50; (follow links to similar papers)
79 pages, November 1996
- This paper is published as:
Teräsvirta, Timo, (1998), 'Modelling Economic Relationships with Smooth Transition Regressions' in Ullah, A. and D.E.A. Giles (eds.) Handbook of Applied Economic Statistics, pages 507-552, Dekker.
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