THRET: Threshold Regression with Endogenous Threshold Variables

Andros Kourtellos (), Chih Ming Tan () and Thanasis Stengos ()
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Chih Ming Tan: Tufts University, USA.

Working Paper Series from Rimini Centre for Economic Analysis

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

New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ore
Date: 2008-01, Revised 2008-01

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Working Paper: THRET: Threshold Regression with Endogenous Threshold Variables (2008)
Working Paper: THRET: Threshold Regression with Endogenous Threshold Variables (2008)
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