SSE/EFI Working Paper Series in Economics and Finance
Determining the Number of Regimes in a Threshold Autoregressive Model Using Smooth Transition Autoregressions
() and Timo Teräsvirta
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.
Keywords: Model specification; model selection criterion; nonlinear modelling; sequential testing; switching regression; (follow links to similar papers)
JEL-Codes: C22; C51; (follow links to similar papers)
28 pages, January 11, 2005, Revised February 11, 2005
This is an early version of the paper published under a different title in Econometrics Journal 9, 472-491 (2006).
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- This paper is published as:
Strikholm, Birgit and Timo Teräsvirta, (2006), 'A Sequential Procedure for Determining the Number of Regimes in a Threshold Autoregressive Model', Econometrics Journal, Vol. 9, pages 472-491
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