Robust inference for threshold regression models

DOI10.1016/J.JECONOM.2019.01.008zbMATH Open1452.62644arXiv1702.00836OpenAlexW2899717922MaRDI QIDQ2000828FDOQ2000828

Myung Hwan Seo, Jungyoon Lee, Javier Hidalgo

Publication date: 1 July 2019

Published in: Journal of Econometrics (Search for Journal in Brave)

Abstract: This paper is concerned with inference in threshold regression models when the practitioners do not know whether at the threshold point the true specification has a kink or a jump. We nest previous works that assume either continuity or discontinuity at the threshold point and develop robust inference methods on the parameters of the model, which are valid under both specifications. In particular, we found that the parameter values under the kink restriction are irregular points of the Hessian matrix of the expected Gaussian quasi-likelihood. This irregularity destroys the asymptotic normality and induces the non-standard cube root convergence rate for the threshold estimate. However, it also enables us to obtain the same asymptotic distribution as in Hansen (2000) for the quasi-likelihood ratio statistic for the unknown threshold up to an unknown scale parameter. We show that this scale parameter can be consistently estimated by a kernel method as long as no higher order kernel is used. Furthermore, we propose to construct confidence intervals for the unknown threshold by bootstrap test inversion, also known as grid bootstrap. Finite sample performances of the grid bootstrap confidence intervals are examined through Monte Carlo simulations. We also implement our procedure to an economic empirical application.

Full work available at URL: https://arxiv.org/abs/1702.00836

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zbMATH Keywords

change pointkinkcube rootgrid bootstrap

Mathematics Subject Classification ID

Asymptotic properties of nonparametric inference (62G20) Time series, auto-correlation, regression, etc. in statistics (GARCH) (62M10) Applications of statistics to economics (62P20) Asymptotic distribution theory in statistics (62E20) Nonparametric statistical resampling methods (62G09)

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Cited In (15)

• A note on regression kink model
• Threshold effect in varying coefficient models with unknown heteroskedasticity
• A multi-kink quantile regression model with common structure for panel data analysis
• Threshold regression with nonparametric sample splitting
• Threshold estimation for continuous three‐phase polynomial regression models with constant mean in the middle regime
• A Threshold Model of Real U.S. GDP and the Problem of Constructing Confidence Intervals in TAR Models
• Asymptotics for threshold regression under general conditions
• Segment regression model average with multiple threshold variables and multiple structural breaks
• Threshold heteroskedastic models
• Sample Splitting and Threshold Estimation
• Estimation and testing of kink regression model with endogenous regressors
• Threshold spatial autoregressive model
• Testing for Threshold Effects in Regression Models
• Testing for homogeneous thresholds in threshold regression models
• Estimation and Inference for Multi-Kink Quantile Regression

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