Markov Switching Models, Threshold Auto Regressive Models, and Smooth Transition Models

Sarit Maitra ()
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Sarit Maitra: Alliance University—Central Campus, Chikkahadage Cross Chandapura-Anekal

Chapter Chapter 5 in Non-Linearity in Econometric Modeling, Vol. 1, 2025, pp 159-188 from Springer

Abstract: Abstract This chapter explores nonlinear time-series models, focusing on Markov Switching Autoregressive (MSAR), Threshold Autoregressive (TAR), and Smooth Transition Autoregressive (STAR) models. MSAR models capture regime-dependent dynamics with probabilistic transitions governed by a Markov process, making them suitable for modeling phenomena such as economic cycles or stock market volatility. TAR models extend this framework by allowing deterministic regime shifts when a threshold variable crosses a certain level, enabling the modeling of systems with abrupt behavioral changes. STAR models further generalize TARs by introducing smooth transitions between regimes, capturing gradual changes in time-series behavior. Together, these models provide a flexible toolkit for analyzing complex, nonlinear dynamics in economics, finance, and other applied fields.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:dymchp:978-3-032-06462-2_5

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DOI: 10.1007/978-3-032-06462-2_5

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