Choosing Lag Lengths in Nonlinear Dynamic Models

Given that it is quite impractical to use standard model selection criteria in a nonlinear modeling context, the builders of nonlinear models often choose lag length by setting it equal to the lag length chosen for a linear autoregression of the data. This paper studies the performance of this procedure in a variety of circumstances, and then proposes some new and simple model selection procedures, based on linear approximations of the nonlinear forms. The idea here is to apply standard selection criteria to these linear approximations, rather than to autoregressions that make no provision for nonlinear behavior. A simulation study compares the properties of these proposed procedures with the properties of linear selection procedures.