Abstract
This chapter provides tools for the empirical practitioner interested in modelling Smooth Transition Regression (STR) models. Nonlinear time series models are being used more frequently in empirical applications, leaving the researcher with a virtual infinity of models and specification from which to choose. However, STR models are a general class of state-dependent, reduced form, nonlinear time series models in which the transition between states is generally endogenously generated. They encompass as particular cases the Smooth Transition Autoregressive (STAR), the Exponential Autoregressive (EAR), the Threshold Autoregressive (TAR), and the SET AR models.1 Together with Hamilton’s Regime Switching model2 (where the transition between regimes is exogenously generated by a Markov chain), state-dependent models have proven useful in modelling the asymmetric behavior of economic fluctuations.3
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