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Threshold effects in non-dynamic panels: Estimation, testing and inference

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  • Bruce E. Hansen

    ()
    (Boston College)

Abstract

Threshold regression methods are developed for non-dynamic panels with individual-specific fixed effects. Least squares estimation of the threshold and regression slopes is proposed using fixed-effects transformations. A non-standard asymptotic theory of inference is developed which allows construction of confidence intervals and testing of hypotheses. The methods are applied to a 15-year sample of 565 U.S. firms to test whether financial constraints affect investment decisions.

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File URL: http://fmwww.bc.edu/EC-P/wp365.pdf
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Bibliographic Info

Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 365.

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Length: 25 pages
Date of creation: 01 May 1997
Date of revision:
Handle: RePEc:boc:bocoec:365

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Keywords: panel data; threshold regression;

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References

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  1. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche, Centre interuniversitaire de recherche en économie quantitative, CIREQ 9552, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  2. Hansen, B.E., 1991. "Inference when a Nuisance Parameter is Not Identified Under the Null Hypothesis," RCER Working Papers 296, University of Rochester - Center for Economic Research (RCER).
  3. Andrew B. Abel & Janice C. Eberly, 1993. "A Unified Model of Investment Under Uncertainty," NBER Working Papers 4296, National Bureau of Economic Research, Inc.
  4. Donald W.K. Andrews & Werner Ploberger, 1992. "Optimal Tests When a Nuisance Parameter Is Present Only Under the Alternative," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1015, Cowles Foundation for Research in Economics, Yale University.
  5. Bruce E. Hansen, 2000. "Sample Splitting and Threshold Estimation," Econometrica, Econometric Society, Econometric Society, vol. 68(3), pages 575-604, May.
  6. Jushan Bai, 1995. "Estimating Multiple Breaks One at a Time," Working papers 95-18, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. repec:cup:etheor:v:13:y:1997:i:3:p:315-52 is not listed on IDEAS
  8. Xiaoqiang Hu & Fabio Schiantarelli, 1998. "Investment And Capital Market Imperfections: A Switching Regression Approach Using U.S. Firm Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 466-479, August.
  9. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
  10. Bronwyn H. Hall & Robert E. Hall, 1993. "The Value and Performance of U.S. Corporations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 1-50.
  11. Robert B. Davies, 2002. "Hypothesis testing when a nuisance parameter is present only under the alternative: Linear model case," Biometrika, Biometrika Trust, Biometrika Trust, vol. 89(2), pages 484-489, June.
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