Endogeneity in Semiparametric Threshold Regression

Andros Kourtellos, Thanasis Stengos and Yiguo Sun

University of Cyprus Working Papers in Economics from University of Cyprus Department of Economics

Abstract: 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)
Pages: 62 pages
Date: 2017-12
New Economics Papers: this item is included in nep-ore
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Citations: View citations in EconPapers (9)

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https://papers.econ.ucy.ac.cy/RePEc/papers/10-17.pdf (application/pdf)

Related works:
Journal Article: ENDOGENEITY IN SEMIPARAMETRIC THRESHOLD REGRESSION (2022)
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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