STRUCTURAL THRESHOLD REGRESSION

Andros Kourtellos, Thanasis Stengos and Chih Ming Tan

Econometric Theory, 2016, vol. 32, issue 4, 827-860

Abstract: This paper introduces the structural threshold regression (STR) model that allows for an endogenous threshold variable as well as for endogenous regressors. This model provides a parsimonious way of modeling nonlinearities and has many potential applications in economics and finance. Our framework can be viewed as a generalization of the simple threshold regression framework of Hansen (2000, Econometrica 68, 575–603) and Caner and Hansen (2004, Econometric Theory 20, 813–843) to allow for the endogeneity of the threshold variable and regime-specific heteroskedasticity. Our estimation of the threshold parameter is based on a two-stage concentrated least squares method that involves an inverse Mills ratio bias correction term in each regime. We derive its asymptotic distribution and propose a method to construct confidence intervals. We also provide inference for the slope parameters based on a generalized method of moments. Finally, we investigate the performance of the asymptotic approximations using a Monte Carlo simulation, which shows the applicability of the method in finite samples.

Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (37)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
Working Paper: Structural Threshold Regression (2011)
Working Paper: Structural Threshold Regression (2011)
Working Paper: Structural Threshold Regression (2009)
Working Paper: Structural Threshold Regression (2009)
Working Paper: Structural Threshold Regression (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:etheor:v:32:y:2016:i:04:p:827-860_00

Access Statistics for this article

More articles in Econometric Theory from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().