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Maximum Likelihood Estimation of Dynamic Panel Threshold Models

Author

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  • Nelson Ramírez-Rondán

    (Central Bank of Peru)

Abstract

Threshold estimation methods are developed for dynamic panels with individual fixed specific effects covering short time periods. Maximum likelihood estimation of the threshold and the slope parameters is proposed using first difference transformations. Threshold estimate is shown to be consistent and it converges to a double-sided standard Brownian motion distribution, when the number of individuals grows to infinity for a fixed time period; and the slope estimates are consistent and asymptotically normally distributed. The method is applied to a sample of 72 countries and 8 periods of 5-year averages to determine the effect of inflation rate on long-run economic growth.

Suggested Citation

  • Nelson Ramírez-Rondán, 2015. "Maximum Likelihood Estimation of Dynamic Panel Threshold Models," Working Papers 2015-32, Peruvian Economic Association.
  • Handle: RePEc:apc:wpaper:2015-032
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    References listed on IDEAS

    as
    1. Seo, Myung Hwan & Linton, Oliver, 2007. "A smoothed least squares estimator for threshold regression models," Journal of Econometrics, Elsevier, vol. 141(2), pages 704-735, December.
    2. Kourtellos, Andros & Stengos, Thanasis & Tan, Chih Ming, 2016. "Structural Threshold Regression," Econometric Theory, Cambridge University Press, vol. 32(4), pages 827-860, August.
    3. Hsiao, Cheng & Hashem Pesaran, M. & Kamil Tahmiscioglu, A., 2002. "Maximum likelihood estimation of fixed effects dynamic panel data models covering short time periods," Journal of Econometrics, Elsevier, vol. 109(1), pages 107-150, July.
    4. Norman Loayza & Pablo Fajnzylber & César Calderón, 2005. "Economic Growth in Latin America and the Caribbean : Stylized Facts, Explanations, and Forecasts," World Bank Publications, The World Bank, number 7315.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. N.R. Ramírez-Rondán & Marco E. Terrones, 2019. "Uncertainty and the Uncovered Interest Parity Condition: How Are They Related?," Working Papers 156, Peruvian Economic Association.

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    More about this item

    Keywords

    Threshold Models; Dynamic Panel Data; Maximum Likelihood Estimation; Inflation; Economic Growth;
    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

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