Endogeneity in Semiparametric Threshold Regression
Thanasis Stengos () and
University of Cyprus Working Papers in Economics from University of Cyprus Department of Economics
In this paper, we investigate semiparametric threshold regression models with endogenous threshold variables based on a nonparametric control function approach. Using a series approximation we propose a two-step estimation method for the threshold parameter. For the regression coefficients we consider least-squares estimation in the case of exogenous regressors and two-stage least-squares estimation in the case of endogenous regressors. We show that our estimators are consistent and derive their asymptotic distribution for weakly dependent data. Furthermore, we propose a test for the endogeneity of the threshold variable, which is valid regardless of whether the threshold effect is zero or not. Finally, we assess the performance of our methods using a Monte Carlo simulation.
Keywords: control function; series estimation; threshold regression (search for similar items in EconPapers)
JEL-codes: C14 C24 C51 (search for similar items in EconPapers)
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Working Paper: Endogeneity in Semiparametric Threshold Regression (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ucy:cypeua:10-2017
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