The threshold model describes the jumping character or structural break in the re-lationship between variables.This model type is popular in nonlinear time series,one example being the threshold autoregressive(TAR)model(Tong1983).This model can capture many economic phenomena.For example,using?ve-year interval averages of standard measures of?nancial development,in?ation,and growth for84countries from 1960to1995,Rousseau and Wachtel(2009)showed that there is an in?ation thresh-old for the?nance and growth relationship that lies between13–25%.When in?ation exceeds the threshold,?nance ceases to increase economic growth.In?ation’s e?ect on economic growth depends on the in?ation level.High levels of in?ation are harmful to economic growth,while low levels of in?ation are bene?cial to economic growth.As an-other example,the technical spillover of foreign direct investment(FDI)has been widely studied.Girma(2005)found that the productivity bene?t from FDI increases with ab-sorptive capacity until some threshold level,at which point it becomes less pronounced. Heterogeneity is a common problem of panel data.That is to say,each individual in a study is di?erent,and structural relationships may vary across individuals.The classical ?xed e?ect or random e?ect re?ects only the heterogeneity in intercepts.Hsiao(2003) considers many varying slope models for this problem.Among these models,Hansen’s (1999)panel threshold model has a simple speci?cation but obvious implications for economic policy.Though threshold models are familiar in time-series analysis,their use with panel data has been limited. Keywords:st0373,xthreg,panel threshold,?xed e?ect Of Econometrics93:345–368])to further demonstrate the use of xthreg. ![]() Include an example on?nancial constraints(originally from Hansen[1999,Journal Is small,the coverage rate of the con?dence interval estimator is unsatisfactory.I Simulations to show that,although the size distortion of the threshold-e?ect test Parameters.To combat this issue,Hansen(1999,Journal of Econometrics93:345–ģ68)proposed the?xed-e?ect panel threshold model.In this article,I introduceĪ new command(xthreg)for implementing this model.I also use Monte Carlo However,estimation and inference is complicated by the existence of nuisance ![]() ![]() Nankai models are widely used in macroeconomics and?nancialĪnalysis for their simple and obvious economic implications.With these models, Fixed-e?ect panel threshold model using Stata
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