Two-Regime Threshold Autoregressive Model Simulation

This Demonstration allows you to study realizations from a two-regime threshold autoregressive (TAR) process of the first order by changing its parameters. The two-regime TAR(1) model is represented by:


Parameters are initially set to , , and to obtain the following two-regime TAR(1) process:
Note that the process is stationary and geometrically ergodic despite the coefficient -1.5 in the first regime. The series contains large upward jumps when it becomes negative (due to the -1.5 coefficient) and there are more positive than negative jumps. The model also contains no constant term, but is not zero.