Improved Testing and Specification of Smooth Transition Regression Models

UC Davis Working Paper #97-26

Posted: 29 Nov 1997

See all articles by Álvaro Escribano

Álvaro Escribano

Charles III University of Madrid - Department of Economics

Oscar Jorda

Federal Reserve Banks - Federal Reserve Bank of San Francisco; University of California, Davis - Department of Economics

Date Written: October 1997

Abstract

This paper extends previous work in Escribano and Jorda (1997) and introduces new LM specification procedures to choose between Logistic and Exponential Smooth Transition Regression (STR) Models. These procedures are simpler, consistent and more powerful than those previously available in the literature. An analysis of the properties of Taylor approximations around the transition function of STR models permits one to understand why these procedures work better and it suggests ways to improve tests of the null hypothesis of linearity versus the alternative of STR-type nonlinearity. Monte-Carlo experiments illustrate the performance of the different tests introduced. The new procedures are then implemented on a study of the dynamics of the U.S. unemployment rate.

JEL Classification: C12, C22, C52

Suggested Citation

Escribano, Álvaro and Jorda, Oscar, Improved Testing and Specification of Smooth Transition Regression Models (October 1997). UC Davis Working Paper #97-26, Available at SSRN: https://ssrn.com/abstract=43980

Álvaro Escribano (Contact Author)

Charles III University of Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain
+34-91 6249854 (Phone)
+34-91 6249329 (Fax)

HOME PAGE: http://www.eco.uc3m.es/english/staff/contact_info/

Oscar Jorda

Federal Reserve Banks - Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States
4159742691 (Phone)

HOME PAGE: http://www.frbsf.org/economic-research/economists/oscar-jorda/

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
530-5549382 (Phone)

HOME PAGE: http://old.econ.ucdavis.edu/faculty/jorda/

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