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Generalizing smooth transition autoregressions

Author

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  • Emilio Zanetti Chini

    (Department of Economics and Management)

Abstract
We introduce a new time series model capable to parametrize the joint asymmetry in duration and length of cycles - the dynamic asymmetry - by using a particular generalization of the logistic function. The modelling strategy is discussed in detail, with particular emphasis on two different tests for the null of symmetric adjustment and three diagnostic tests, whose power properties are explored via Monte Carlo experiments. Four case studies in classical economic and biological real datasets illustrate the versatility of the new model in different fields. In all the cases, the dynamic asymmetry in the cycle is efficiently detected and modelled. Finally, a rolling forecasting exercise is applied to the resulting estimates. Our model beats linear and conventional nonlinear competitors in point forecasting, while this superiority becomes less evident in density forecasting, specially when relying on robust measures.

Suggested Citation

  • Emilio Zanetti Chini, 2016. "Generalizing smooth transition autoregressions," DEM Working Papers Series 114, University of Pavia, Department of Economics and Management.
    • Handle: RePEc:pav:demwpp:demwp0114
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    References listed on IDEAS

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    Cited by:

    1. Lorenza Rossi & Emilio Zanetti Chini, 2016. "Firms’ Dynamics and Business Cycle: New Disaggregated Data," DEM Working Papers Series 123, University of Pavia, Department of Economics and Management.
    2. Canepa, Alessandra & Chini, Emilio Zanetti, 2016. "Dynamic asymmetries in house price cycles: A generalized smooth transition model," Journal of Empirical Finance, Elsevier, vol. 37(C), pages 91-103.

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    More about this item

    Keywords

    Dynamic asymmetry; Nonlinear time series; Econometric Modelling; Point forecasts; Density forecasts; Evaluating forecasts; Combining forecasts; Error measures.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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