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THRET: Threshold Regression with Endogenous Threshold Variables

Author

Listed:
  • Kourtellos, A.
  • Tan, C.M.
  • Stengos, T.

    () (University of Guelph, Department of Economics)

Abstract

This paper extends the simple threshold regression framework of Hansen (2000) and Caner and Hansen (2004) to allow for endogeneity of the threshold variable. We develop a concentrated two-stage least squares (C2SLS) estimator of the threshold parameter that is based on an inverse Mills ratio bias correction. Our method also allows for the endogeneity of the slope variables. We show that our estimator is consistent and investigate its performance using a Monte Carlo simulation that indicates the applicability of the method in finite samples. We also illustrate its usefulness with an empirical example from economic growth. JEL Classifications: C13, C51
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Kourtellos, A. & Tan, C.M. & Stengos, T., 2008. "THRET: Threshold Regression with Endogenous Threshold Variables," Working Papers 0801, University of Guelph, Department of Economics and Finance.
  • Handle: RePEc:gue:guelph:2008-1
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    References listed on IDEAS

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    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. Durlauf, Steven N. & Kourtellos, Andros & Minkin, Artur, 2001. "The local Solow growth model," European Economic Review, Elsevier, vol. 45(4-6), pages 928-940, May.
    3. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    4. Caner, Mehmet & Hansen, Bruce E., 2004. "Instrumental Variable Estimation Of A Threshold Model," Econometric Theory, Cambridge University Press, vol. 20(05), pages 813-843, October.
    5. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    6. Chih Ming Tan, 2010. "No one true path: uncovering the interplay between geography, institutions, and fractionalization in economic development," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(7), pages 1100-1127, November/.
    7. Andreas Savvides & Theofanis P. Mamuneas & Thanasis Stengos, 2006. "Economic development and the return to human capital: a smooth coefficient semiparametric approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(1), pages 111-132.
    8. Durlauf, Steven N & Johnson, Paul A, 1995. "Multiple Regimes and Cross-Country Growth Behaviour," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(4), pages 365-384, Oct.-Dec..
    9. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    10. Gonzalo, Jesus & Wolf, Michael, 2005. "Subsampling inference in threshold autoregressive models," Journal of Econometrics, Elsevier, vol. 127(2), pages 201-224, August.
    11. Easterly, William & Levine, Ross, 2003. "Tropics, germs, and crops: how endowments influence economic development," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 3-39, January.
    12. Bruce E. Hansen, 2000. "Sample Splitting and Threshold Estimation," Econometrica, Econometric Society, vol. 68(3), pages 575-604, May.
    13. Jeffrey D. Sachs, 2003. "Institutions Don't Rule: Direct Effects of Geography on Per Capita Income," NBER Working Papers 9490, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Thanassis Kazanas & Elias Tzavalis, 2011. "Unveiling the monetary policy rule in euro area," Working Papers 130, Bank of Greece.
    2. repec:ipg:wpaper:2014-455 is not listed on IDEAS
    3. Farhani, Sahbi & Shahbaz, Muhammad, 2014. "What role of renewable and non-renewable electricity consumption and output is needed to initially mitigate CO2 emissions in MENA region?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 40(C), pages 80-90.
    4. Alia, Didier Yelognisse & Anago, Romuald E. Kouadio, 2014. "Foreign aid effectiveness in African economies: Evidence from a panel threshold framework," WIDER Working Paper Series 015, World Institute for Development Economic Research (UNU-WIDER).
    5. George Kapetanios & James Mitchell & Yongcheol Shin, 2010. "A Nonlinear Panel Model of Cross-sectional Dependence," Working Papers 673, Queen Mary University of London, School of Economics and Finance.
    6. Gebauer, Stefan & Setzer, Ralph & Westphal, Andreas, 2017. "Corporate debt and investment: a firm level analysis for stressed euro area countries," Working Paper Series 2101, European Central Bank.
    7. Otilia Boldea & Alastair R. Hall, 2013. "Testing structural stability in macroeconometric models," Chapters,in: Handbook of Research Methods and Applications in Empirical Macroeconomics, chapter 9, pages 206-228 Edward Elgar Publishing.
    8. Lee, Hsiu-Yun, 2011. "Nonlinear exchange rate dynamics under stochastic official intervention," Economic Modelling, Elsevier, vol. 28(4), pages 1510-1518, July.
    9. Markus Eberhardt & Francis Teal, 2011. "Econometrics For Grumblers: A New Look At The Literature On Cross‐Country Growth Empirics," Journal of Economic Surveys, Wiley Blackwell, vol. 25(1), pages 109-155, February.
    10. Bose, Niloy & Murshid, Antu Panini & Wurm, Martin A., 2012. "The Growth Effects of Property Rights: The Role of Finance," World Development, Elsevier, vol. 40(9), pages 1784-1797.

    More about this item

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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