Testing an autoregressive structure in binary time series models

Henri Nyberg

Economics Bulletin, 2010, vol. 30, issue 2, 1460-1473

Abstract: This paper introduces a Lagrange Multiplier (LM) test for testing an autoregressive structure in a binary time series model proposed by Kauppi and Saikkonen (2008). Simulation results indicate that the two versions of the proposed LM test have reasonable size and power properties when the sample size is large. A parametric bootstrap method is suggested to obtain approximately correct sizes also in small samples. The use of the test is illustrated by an application to recession forecasting models using monthly U.S. data.

Keywords: LM test; Binary response; Dynamic probit model; Parametric bootstrap; Recession forecasting (search for similar items in EconPapers)
JEL-codes: C1 C2 (search for similar items in EconPapers)
Date: 2010-05-18
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