Panel Smooth Transition Regression Models
Andres Gonzalez (),
Timo Teräsvirta (),
Dick van Dijk () and
Yukai Yang ()
No 604, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics
We introduce the panel smooth transition regression model. This new model is intended for characterizing heterogeneous panels, allowing the regression coefficients to vary both across individuals and over time. Specifically, heterogeneity is allowed for by assuming that these coefficients are bounded continuous functions of an observable variable and fluctuate between a limited number of "extreme regimes". The model can be viewed as a generalization of the threshold panel model of Hansen (1999). We extend the modelling strategy originally designed for univariate smooth transition regression models to the panel context. The strategy consists of model specification based on homogeneity tests, parameter estimation, and model evaluation, including tests of parameter constancy and no remaining heterogeneity. The model is applied to describing firms' investment decisions in the presence of capital market imperfections.
Keywords: financial constraints; heterogeneous panel; investment; misspecification test; nonlinear modelling of panel data; smooth transition model. (search for similar items in EconPapers)
JEL-codes: C12 C23 C52 G31 G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-ets
Date: 2005-08-17, Revised 2017-10-11
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Working Paper: Panel Smooth Transition Regression Models (2017)
Working Paper: Panel Smooth Transition Regression Models (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0604
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