Fixed-effect panel threshold model using Stata
Qunyong Wang
Institute of Statistics and Econometrics
Nankai University
Tianjin, China
[email protected]
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Abstract. Threshold models are widely used in macroeconomics and financial analysis for
their simple and obvious economic implications. With these models, however,
estimation and inference is complicated by the existence of nuisance
parameters. To combat this issue, Hansen (1999, Journal of Econometrics
93: 345–368) proposed the fixed-effect panel threshold model. In this
article, I introduce a new command (xthreg) for implementing this model.
I also use Monte Carlo simulations to show that, although the size distortion
of the threshold-effect test is small, the coverage rate of the confidence
interval estimator is unsatisfactory. I include an example on financial
constraints (originally from Hansen [1999, Journal of Econometrics 93:
345–368]) to further demonstrate the use of xthreg.
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Qunyong Wang
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xthreg, panel threshold, fixed effect
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