Endogeneity in Semiparametric Threshold Regression Model With Two Threshold Variables

23 Pages Posted: 25 Oct 2021

See all articles by Chaoyi Chen

Chaoyi Chen

Central Bank of Hungary

Thanasis Stengos

University of Guelph - Department of Economics

Yiguo Sun

University of Guelph

Date Written: September 7, 2021

Abstract

This paper considers a semiparametric threshold regression model with two threshold variables,
extending Chen et al. (2012) and Kourtellos et al. (2021). The proposed model allows the endogeneity for both threshold variables and the slope regressors. Under the diminishing threshold
effects assumption, we show the consistency and derive the asymptotic results of our proposed
estimator for weakly dependent data. We study the finite sample performance of our proposed
estimator via small Monte Carlo simulations and we apply our model to classify economic growth
regimes based on both national public debt and national external debt.

Keywords: Control function; Public debt; Series estimation; Threshold regression.

JEL Classification: C14, C24, O40

Suggested Citation

Chen, Chaoyi and Stengos, Thanasis and Sun, Yiguo, Endogeneity in Semiparametric Threshold Regression Model With Two Threshold Variables (September 7, 2021). Available at SSRN: https://ssrn.com/abstract=3947899 or http://dx.doi.org/10.2139/ssrn.3947899

Chaoyi Chen (Contact Author)

Central Bank of Hungary ( email )

Hungary

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

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