Department of Economics and Business Economics

Linearity and Misspecification Tests for Vector Smooth Transition Regression Models

Research output: ResearchWorking paper

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  • rp14_04

    Accepted manuscript, 501 KB, PDF-document

The purpose of the paper is to derive Lagrange multiplier and Lagrange multiplier type specification and misspecification tests for vector smooth transition regression models. We report results from simulation studies in which the size and power properties of the proposed asymptotic tests in small samples are considered. The results on simulating the size show that these tests generally suffer from positive size distortion. We find that both Wilks's Λ and Rao's F statistic, the latter in particular, have satisfactory size properties and can generally be recommended for empirical use. The local asymptotic power and finite sample power properties of these tests are studied as well.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages39
StatePublished - 17 Feb 2014
SeriesCREATES Research Papers
Number2014-4

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