Inference and Specification Testing in Threshold Regression with Endogeneity

@article{Yu2019InferenceAS,
  title={Inference and Specification Testing in Threshold Regression with Endogeneity},
  author={Ping Yu and Qin Liao and Peter C. B. Phillips},
  journal={Yale: Cowles Foundation Working Papers},
  year={2019}
}
We propose three new methods of inference for the threshold point in endogenous threshold regression and two specii¬ cation tests designed to assess the presence of endogeneity and threshold ei¬€ects without necessarily relying on instrumentation of the covariates. The i¬ rst inferential method is a parametric two-stage least squares method and is suitable when instruments are available. The second and third methods are based on smoothing the objective function of the integrated dii¬€erence… 
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7 Citations

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A new algorithm to ease the computation of the threshold boundary is put forward, the asymptotics for the least squares estimator are developed, and a new score-type test is proposed to test for the existence of threshold effects.

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