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TESTING FOR EXOGENEITY IN THRESHOLD MODELS

Published online by Cambridge University Press:  13 August 2009

George Kapetanios
George Kapetanios*
Affiliation:
Queen Mary, University of London
*
*Address correspondence to George Kapetanios, Department of Economics, Queen Mary, University of London, Mile End Road, London E1 4NS; email: G.Kapetanios@qmul.ac.uk.
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Abstract

Most work in the area of nonlinear econometric modeling is based on a single equation and assumes exogeneity of the explanatory variables. Recently, work by Caner and Hansen (2004) and Psaradakis, Sola, and Spagnolo (2005) has considered the possibility of estimating nonlinear models by methods that take into account endogeneity but provide no tests for exogeneity. This paper examines the problem of testing for exogeneity in nonlinear threshold models. We suggest new Hausman-type tests and discuss the use of the bootstrap to improve the properties of asymptotic tests. The theoretical properties of the tests are discussed and an extensive Monte Carlo study is undertaken.

Type
ARTICLES
Information
Econometric Theory , Volume 26 , Issue 1 , February 2010 , pp. 231 - 259
Copyright
Copyright © Cambridge University Press 2009

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