Effects of filtering data on testing asymmetry in threshold autoregressive models

Li Jing ()
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Li Jing: Miami University, Economics, 800 H High Street, Oxford, OH 45056, USA

Studies in Nonlinear Dynamics & Econometrics, 2016, vol. 20, issue 5, 549-565

Abstract: Empirical macroeconomic research on business cycle typically filters economic time series in order to obtain cyclical components. This paper examines the effects of filtering data on the test for a linear autoregression against a threshold autoregression. Monte Carlo simulation shows that (1) filtering data in general reduces the power of the test, (2) the power is sensitive to the choice of filters and the specification of the trend and cyclical components, (3) regime-varying variance of the error term can affect the rejection frequency. Empirical evidences for cyclical asymmetry are provided for the quarterly US real GNP.

Keywords: Band Pass filter; Hodrick-Prescott filter; moving average filter; simulation; threshold autoregression (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1515/snde-2015-0016

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