A flexible coefficient smooth transition time series model.
In this paper, we consider a flexible smooth transition autoregressive (STAR) model with multiple regimes and multiple transition variables. This formulation can be interpreted as a time varying linear model where the coefficients are the outputs of a single hidden layer feedforward neural network. This proposal has the major advantage of nesting several nonlinear models, such as, the self-exciting threshold autoregressive (SETAR), the autoregressive neural network (AR-NN), and the logistic STAR models. Furthermore, if the neural network is interpreted as a nonparametric universal approximation to any Borel measurable function, our formulation is directly comparable to the functional coefficient autoregressive (FAR) and the single-index coefficient regression models. A model building procedure is developed based on statistical inference arguments. A Monte Carlo experiment showed that the procedure works in small samples, and its performance improves, as it should, in medium size samples. Several real examples are also addressed.
Medeiros
Marcelo C
MC
Department of Economics, Pontifical Catholic University of Rio de Janeiro, Rio de Janeiro, RJ 22451-900 Brazil.
Veiga
Alvaro
A
D000465:Algorithms; D001185:Artificial Intelligence; D016000:Cluster Analysis; D003205:Computing Methodologies; D016571:Neural Networks, Computer; D017711:Nonlinear Dynamics; D009716:Numerical Analysis, Computer-Assisted; D010363:Pattern Recognition, Automated / Q000379:methods; D012815:Signal Processing, Computer-Assisted; D013997:Time Factors