A mixture of ordered probit models with endogenous switching between two latent classes

Jochem Huismans (), Jan Willem Nijenhuis () and Andrei Sirchenko
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Jochem Huismans: University of Amsterdam
Jan Willem Nijenhuis: Nedap NV

Stata Journal, 2022, vol. 22, issue 3, 557-596

Abstract: Ordinal responses can be generated, in a cross-sectional context, by different unobserved classes of population or, in a time-series context, by differ- ent latent regimes. We introduce a new command, swopit, that fits a mixture of ordered probit models with exogenous or endogenous switching between two latent classes (regimes). Switching is endogenous if unobservables in the class- assignment model are correlated with unobservables in the outcome models. We provide a battery of postestimation commands; assess via Monte Carlo experiments the finite-sample performance of the maximum likelihood estimator of the param- eters, probabilities, and their standard errors (both the asymptotic and bootstrap ones); and apply the new command to model the monetary policy interest rates.

Keywords: swopit; swopit postestimation; swopitpredict; swopitprobabilities; swopitmargins; swopitclassification; ordinal responses; ordered probit; finite mixture model; latent class; regime switching; endogenous switching (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1177/1536867X221124516

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