State-Dependent Threshold Smooth Transition Autoregressive Models


  • The authors wish to thank an Associate Editor and an anonymous referee for helpful comments and suggestions. The third author also thanks the Institute for Economic Analysis at the Universitat Autònoma de Barcelona for hospitality while part of this research was carried out and the Ministry of Education for financial support.


In this article, we consider extensions of smooth transition autoregressive (STAR) models to situations where the threshold is a function of variables that affect the separation of regimes of the time series under consideration. Our specification is motivated by the observation that unusually high/low values for an economic variable may sometimes be best thought of in relative terms. State-dependent contemporaneous-threshold STAR and logistic STAR models are introduced and discussed. These models are also used to investigate the dynamics of US short-term interest rates, where the threshold is allowed to be a function of past output growth and inflation.