A simple specification procedure for the transition function in persistent nonlinear time series models

Hendrik Kaufmann, Robinson Kruse and Philipp Sibbertsen

Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät

Abstract: A simple procedure for the specification of the transition function describing the regime switch in nonlinear autoregressive models is proposed. This procedure is based on auxiliary regressions of unit root tests and is applicable to a variety of transition functions. In contrast to other procedures, complicated and computer-intense estimation of the candidate models is not necessary. Our approach entirely relies on OLS estimation of auxiliary regressions instead. We use standard information criteria for the selection of the unknown transition function. Our Monte Carlo simulations reveal that the approach works well in practice. Empirical applications to the S&P500 price-earnings ratio and the US interest spread highlight the merits of our suggested procedure.

Keywords: Nonlinearity; Smooth transition; Threshold model; Model selection; Unit root (search for similar items in EconPapers)
JEL-codes: C15 C22 C52 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2012-07
New Economics Papers: this item is included in nep-ecm and nep-ets
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://diskussionspapiere.wiwi.uni-hannover.de/pdf_bib/dp-500.pdf (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:han:dpaper:dp-500

Access Statistics for this paper

More papers in Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät Contact information at EDIRC.
Bibliographic data for series maintained by Heidrich, Christian ().