Regularized Bayesian estimation in generalized threshold regression models
AbstractEstimation of threshold parameters in (generalized) threshold regression models is typically performed by maximizing the corresponding pro file likelihood function. Also, certain Bayesian techniques based on non-informative priors are developed and widely used. This article draws attention to settings (not rare in practice) in which these standard estimators either perform poorly or even fail. In particular, if estimation of the regression coeffcients is associated with high uncertainty, the pro file likelihood for the threshold parameters and thus the corresponding estimator can be highly aff ected. We suggest an alternative estimation method employing the empirical Bayes paradigm, which allows to circumvent defi ciencies of standard estimators. The new estimator is completely data-driven and induces little additional numerical e ffort compared with the old one. Simulation results show that our estimator outperforms commonly used estimators and produces excellent results even if the latter show poor performance. The practical relevance of our approach is illustrated by a real-data example; we follow up the anlysis of cross-country growth behavior detailed in Hansen (2000).
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Courant Research Centre PEG in its series Courant Research Centre: Poverty, Equity and Growth - Discussion Papers with number 99.
Date of creation: 07 Oct 2011
Date of revision: 18 Oct 2012
Contact details of provider:
Postal: Platz der Goettinger Sieben 3; D-37073 Goettingen, GERMANY
Phone: +49 551 39 14066
Fax: + 49 551 39 14059
Web page: http://www.uni-goettingen.de/en/82144.html
threshold estimation; nuisance parameters; empirical Bayes;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-15 (All new papers)
- NEP-ECM-2011-10-15 (Econometrics)
- NEP-ETS-2011-10-15 (Econometric Time Series)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andrews, Donald W K, 1993.
"Tests for Parameter Instability and Structural Change with Unknown Change Point,"
Econometrica, Econometric Society,
Econometric Society, vol. 61(4), pages 821-56, July.
- Donald W.K. Andrews, 1990. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 943, Cowles Foundation for Research in Economics, Yale University.
- Lee, Sokbae & Seo, Myung Hwan & Shin, Youngki, 2011.
"Testing for Threshold Effects in Regression Models,"
Journal of the American Statistical Association, American Statistical Association,
American Statistical Association, vol. 106(493), pages 220-231.
- Sokbae 'Simon' Lee & Myung Hwan Seo & Youngki Shin, 2010. "Testing for threshold effects in regression models," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP36/10, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
- Ciprian M. Crainiceanu & David Ruppert, 2004. "Likelihood ratio tests in linear mixed models with one variance component," Journal of the Royal Statistical Society Series B, Royal Statistical Society, Royal Statistical Society, vol. 66(1), pages 165-185.
- Noelle I. Samia & Kung-Sik Chan, 2011. "Maximum likelihood estimation of a generalized threshold stochastic regression model," Biometrika, Biometrika Trust, Biometrika Trust, vol. 98(2), pages 433-448.
- repec:att:wimass:9419 is not listed on IDEAS
- Bruce E. Hansen, 2000.
"Sample Splitting and Threshold Estimation,"
Econometrica, Econometric Society,
Econometric Society, vol. 68(3), pages 575-604, May.
- Bruce E. Hansen, 1996. "Sample Splitting and Threshold Estimation," Boston College Working Papers in Economics, Boston College Department of Economics 319., Boston College Department of Economics, revised 12 May 1998.
- Durlauf, Steven N & Johnson, Paul A, 1995.
"Multiple Regimes and Cross-Country Growth Behaviour,"
Journal of Applied Econometrics, John Wiley & Sons, Ltd.,
John Wiley & Sons, Ltd., vol. 10(4), pages 365-84, Oct.-Dec..
- Durlauf, S.M. & Johnson, P.A., 1995. "Multiple Regimes and Cross-Country Growth Behavior," Working papers, Wisconsin Madison - Social Systems 9419r, Wisconsin Madison - Social Systems.
- Hansen, Bruce E. & Seo, Byeongseon, 2002.
"Testing for two-regime threshold cointegration in vector error-correction models,"
Journal of Econometrics, Elsevier,
Elsevier, vol. 110(2), pages 293-318, October.
- Tom Doan, . "RATS programs to replicate Hansen/Seo paper on threshold cointegration," Statistical Software Components, Boston College Department of Economics RTZ00092, Boston College Department of Economics.
- Noelle I. Samia & Kung-Sik Chan & Nils Chr. Stenseth, 2007. "A generalized threshold mixed model for analyzing nonnormal nonlinear time series, with application to plague in Kazakhstan," Biometrika, Biometrika Trust, Biometrika Trust, vol. 94(1), pages 101-118.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dominik Noe).
If references are entirely missing, you can add them using this form.