Estimation of TAR Models

Bruce Hansen ()

No 325., Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: A distribution theory is developed for least squares estimates of the threshold in threshold autoregressive (TAR) models. We find that if we let the threshold effect (the difference in slopes between the two regimes) get small as the sample size increases, then the asymptotic distribution of the threshold estimator is free of nuisance parameters (up to scale). Similarly, the likelihood ratio statistic for testing hypotheses concerning the unknown threshold is asymptotically free of nuisance parameters. These asymptotic distributions are non-standard, but are available in closed form so critical values are readily available. To illustrate this theory, we report applications of these methods to TAR models fit to the U.S. unemployment rate and to the U.S. 3-month Treasury Bill rate. We find statistically significant threshold effects.

Keywords: TAR; threshold autoregression; Markov switching (search for similar items in EconPapers)
JEL-codes: C22 C52 C53 (search for similar items in EconPapers)
Pages: 24 pages
Date: 1996-01-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://fmwww.bc.edu/EC-P/wp325.pdf main text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:325

Access Statistics for this paper

More papers in Boston College Working Papers in Economics from Boston College Department of Economics Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F Baum ().