The threshold autoregressive (TAR) model is a class of nonlinear time series models that have been widely used in many areas. Due to its nonlinear nature, one major difficulty in fitting a TAR model is the estimation of the thresholds. As a first contribution, this paper develops an automatic procedure to estimate the number and values of the thresholds, as well as the corresponding AR order and parameter values in each regime. These parameter estimates are defined as the minimizers of an objective function derived from the minimum description length (MDL) principle. A genetic algorithm is constructed to efficiently solve the associated minimization problem. The second contribution of this paper is the extension of this framework to piecewise TAR modeling; i.e., the time series is partitioned into different segments for which each segment can be adequately modeled by a TAR model, while models from adjacent segments are different. For such piecewise TAR modeling, a procedure is developed to estimate the number and locations of the breakpoints, together with all other parameters in each segment. Desirable theoretical results are derived to lend support to the proposed methodology. Simulation experiments and an application to an U.S. GNP data are used to illustrate the empirical performances of the methodology.
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