TESTING THE ADEQUACY OF SMOOTH TRANSITION AUTOREGRESSIVE MODELS

Smooth transition autoregressive models are a flexible family of nonli near time series models that have also been used for modelling economi c data. This paper contributes to the evaluation stage of a proposed s pecification, estimation, and evaluation cycle of these models by intr oducing a Lagrange multiplier (LM) test for the hypothesis of no error autocorrelation and LM-type tests for the hypothesis of no remaining nonlinearity and that of parameter constancy. Small-sample properties of the F versions of these tests and some alternative test statistics are investigated by simulation. The results indicate that the proposed tests can be applied in small samples already.