Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 390: Forecasting with smooth transition autoregressive models

Stefan Lundbergh () and Timo Teräsvirta ()
Additional contact information
Stefan Lundbergh: Dept. of Economic Statistics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Timo Teräsvirta: Dept. of Economic Statistics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden

Abstract: This paper considers the use of smooth transition autoregressive models for forecasting. First, the modelling of time series with these nonlinear models is discussed. Techniques for obtaining multiperiod forecasts are presented. The usefulness of forecast densities in the case of nonlinear models is considered and techniques of graphically displaying such densities demonstrated. The paper ends with an empirical example of forecasting two quarterly unemployment series.

Keywords: Density forecast; highest density region; nonlinear forecasting; nonlinear modelling; LSTAR model; time series forecasting

JEL-codes: C22; C52

37 pages, June 19, 2000

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