Endogeneity in Semiparametric Threshold Regression

62 Pages Posted: 5 Dec 2017

See all articles by Andros Kourtellos

Andros Kourtellos

University of Cyprus - Department of Economics; University of Bologna - Rimini Center for Economic Analysis (RCEA)

Thanasis Stengos

University of Guelph - Department of Economics

Yiguo Sun

University of Guelph

Date Written: November 29, 2017

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

JEL Classification: C14, C24, C51

Suggested Citation

Kourtellos, Andros and Stengos, Thanasis and Sun, Yiguo, Endogeneity in Semiparametric Threshold Regression (November 29, 2017). Available at SSRN: https://ssrn.com/abstract=3080478 or http://dx.doi.org/10.2139/ssrn.3080478

Andros Kourtellos (Contact Author)

University of Cyprus - Department of Economics ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus

University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

Thanasis Stengos

University of Guelph - Department of Economics ( email )

50 Stone Road East
Guelph, Ontario N1G 2W1
Canada

Yiguo Sun

University of Guelph ( email )

Guelph, Ontario
Canada

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
55
Abstract Views
360
rank
444,698
PlumX Metrics