Use the following commands to simulate a two-regime TAR(1) model with 400 observations.

(a) Obtain a time plot for the data and its sample autocorrelation function with 12 lags.

(b) Obtain a scatter plot of xt versus xt−1 and draw a smooth line on the plot using the loess local smoothing.

(c) Apply the threshold tests of Chapter 1 to confirm the threshold nonlinearity of the time series.

(d) Finally, build a two-regime TAR model for the series and write down the fitted model.

Transcribed Image Text:

require (NTS) set.seed(1) phi