 Dynamic panels with threshold effect and endogeneityMyung Hwan Seo and Yongcheol Shin Journal of Econometrics, 2016, vol. 195, issue 2, 169-186 Abstract: This paper addresses an important issue of modeling nonlinear asymmetric dynamics and unobserved individual heterogeneity in the threshold panel data framework, simultaneously. As a general approach, we develop the first-differenced GMM estimator, which allows both threshold variable and regressors to be endogenous. When the threshold variable becomes strictly exogenous, we propose a more efficient two-step least squares estimator. We provide asymptotic theory and develop the testing procedure for threshold effects and the threshold variable exogeneity. Monte Carlo studies provide a support for theoretical predictions. We present an empirical application investigating an asymmetric sensitivity of investment to cash flows. Keywords: Dynamic panel threshold models; Endogenous threshold effects and regressors; FD-GMM and FD-2SLS; Linearity and exogeneity tests; Investment (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:195:y:2016:i:2:p:169-186 DOI: 10.1016/j.jeconom.2016.03.005 Access Statistics for this article Journal of Econometrics is currently edited by T. Amemiya, A. R. Gallant, J. F. Geweke, C. Hsiao and P. M. Robinson More articles in Journal of Econometrics from Elsevier |
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