- Theory and Applications of TAR Model with Two Threshold Varialbles
- Haiqiang Chen, Terence Tai-Leung Chong, Jushan Bai
- Econometric Reviews
- #002152 20131014 (published)
- A growing body of threshold models has been developed over the past two decades to capture the nonlinear movement of ﬁnancial time series. Most of these models, however, contain a single threshold variable only. In many empirical applications, models with two or more threshold variables are needed. This article develops a new threshold autoregressive model which contains two threshold variables. A likelihood ratio test is proposed to determine the number of regimes in the model. The ﬁnite-sample performance of the estimators is evaluated and an empirical application is provided.
- JEL-Codes: C22.
- Keywords: Bootstrapping; Likelihood ratio test; Misspeciﬁcation; Threshold autoregressive model.
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