Parameter identification in the logistic STAR model

TY - UNPB

T1 - Parameter identification in the logistic STAR model

AU - Ekner, Line Elvstrøm

AU - Nejstgaard, Emil

PY - 2013

Y1 - 2013

N2 - We propose a new and simple parametrization of the so-called speed of transition parameter of the logistic smooth transition autoregressive (LSTAR) model. The new parametrization highlights that a consequence of the well-known identification problem of the speed of transition parameter is that the threshold autoregression (TAR) is a limiting case of the LSTAR process. We demonstrate how this fact impedes numerical optimization of the original parametrization, whereas this is not the case for the new parametrization. Next, we show that information criteria provide a tool to choose between an LSTAR model and a TAR model; a choice previously basedsolely on economic theory. Reestimation of two published applications illustrate the usefulness of our findings.

AB - We propose a new and simple parametrization of the so-called speed of transition parameter of the logistic smooth transition autoregressive (LSTAR) model. The new parametrization highlights that a consequence of the well-known identification problem of the speed of transition parameter is that the threshold autoregression (TAR) is a limiting case of the LSTAR process. We demonstrate how this fact impedes numerical optimization of the original parametrization, whereas this is not the case for the new parametrization. Next, we show that information criteria provide a tool to choose between an LSTAR model and a TAR model; a choice previously basedsolely on economic theory. Reestimation of two published applications illustrate the usefulness of our findings.

M3 - Working paper

T3 - University of Copenhagen. Institute of Economics. Discussion Papers (Online)

BT - Parameter identification in the logistic STAR model

PB - Økonomisk institut, Københavns Universitet

CY - Kbh.

ER -