Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/171329 
Year of Publication: 
2017
Series/Report no.: 
Kiel Working Paper No. 2094
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
(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.
Subjects: 
STR model
multivariate
nonlinear models
testing
JEL: 
C52
C22
C12
Document Type: 
Working Paper

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