Homogenous vs. heterogenous transition functions in smooth transition regressions: A LM-type test

Arbeitspapier

(Panel) Smooth Transition Regressions substantially gained in popularity due to their flexibility in modeling regression coefficients as homogeneous or heterogeneous functions of transition variables. In the estimation process, however, researchers typically face a trade-off in the sense that a single (homogeneous) transition function may yield biased estimates if the true model is heterogeneous, while the latter specification is accompanied by convergence problems and longer estimation time, rendering their application less appealing. This paper proposes a Lagrange multiplier test indicating whether the homogeneous smooth transition regression model is appropriate against the competing heterogeneous alternative. The empirical size and power of the test are evaluated by Monte Carlo simulations.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Kiel Working Paper ; No. 2094

Classification and Topics

• Classification: Wirtschaft ; Model Evaluation, Validation, and Selection ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Hypothesis Testing: General
• Subject: STR model ; multivariate ; nonlinear models ; testing

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Demetrescu, Matei ; Leppin, Julian Sebastian ; Reitz, Stefan
• Event: Veröffentlichung
• (who): Kiel Institute for the World Economy (IfW)
• (where): Kiel
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/171329
• Last update: 10.03.2025, 11:44 AM CET