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Panel data models with two threshold variables

Author

Listed:
  • Lamadrid-Contreras Arturo

    (Banco de México, Mexico City, Mexico)

  • Ramírez-Rondán Nelson R.

    (CEMLA, Mexico City, Mexico)

Abstract

We develop threshold estimation methods for panel data models with two threshold variables and individual fixed specific effects covering short time periods. In the static panel data model, we propose least squares estimation of the threshold and regression slopes using fixed effects transformations; while in the dynamic panel data model, we propose maximum likelihood estimation of the threshold and slope parameters using first difference transformations. In both models, we propose to estimate the threshold parameters sequentially. We apply the methods to a 15-year sample of 565 U.S. firms to test whether financial constraints affect investment decisions.

Suggested Citation

  • Lamadrid-Contreras Arturo & Ramírez-Rondán Nelson R., 2023. "Panel data models with two threshold variables," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 27(3), pages 315-333, June.
    • Handle: RePEc:bpj:sndecm:v:27:y:2023:i:3:p:315-333:n:2
    DOI: 10.1515/snde-2020-0048
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    More about this item

    Keywords

    capital market imperfections; panel data; threshold model;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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