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ESTAR model with multiple fixed points. Testing and Estimation

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  • I A Venetis
  • I Paya
  • D Peel

Abstract

In this paper we propose a globally stationary augmentation of the Exponential Smooth Transition Autoregressive (ESTAR) model that allows for multiple fixed points in the transition function. An F-type test statistic for the null of nonstationarity against such globally stationary nonlinear alternative is developed. The test statistic is based on the standard approximation of the nonlinear function under the null hypothesis by a Taylor series expansion. The model is applied to the U.S real interest rate data for which we find evidence of the new ESTAR process.

Suggested Citation

  • I A Venetis & I Paya & D Peel, 2009. "ESTAR model with multiple fixed points. Testing and Estimation," Working Papers 599093, Lancaster University Management School, Economics Department.
    • Handle: RePEc:lan:wpaper:599093
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    File URL: http://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/economics/working-papers/ESTAR.pdf
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    References listed on IDEAS

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    2. Kotz Hans-Helmut & Semmler Willi & Tahri Ibrahim, 2018. "Financial fragmentation and the monetary transmission mechanism in the euro area: a smooth transition VAR approach," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 22(5), pages 1-19, December.

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