European Business Schools Librarian's Group

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 604: Panel Smooth Transition Regression Models

Andrés González (), Timo Teräsvirta (), Dick van Dijk () and Yukai Yang ()
Additional contact information
Andrés González: Banco de la Republica, Postal: Bogotá,, Colombia
Timo Teräsvirta: CREATES, Aarhus University; C.A.S.E, Humboldt-Universität zu Berlin, Postal: Fuglesangs Allé 4, DK-8210 Aarhus V, Denmark
Dick van Dijk: Econometric Institute, Erasmus University Rotterdam, Postal: PB 1738, NL-3000 DR Rotterdam, The Netherlands
Yukai Yang: Uppsala University, Postal: Department of Statistics, Uppsala University, Uppsala, Sweden

Abstract: We introduce the panel smooth transition regression model. This new model is intended for characterizing heterogeneous panels, allowing the regression coefficients to vary both across individuals and over time. Specifically, heterogeneity is allowed for by assuming that these coefficients are bounded continuous functions of an observable variable and fluctuate between a limited number of "extreme regimes". The model can be viewed as a generalization of the threshold panel model of Hansen (1999). We extend the modelling strategy originally designed for univariate smooth transition regression models to the panel context. The strategy consists of model specification based on homogeneity tests, parameter estimation, and model evaluation, including tests of parameter constancy and no remaining heterogeneity. The model is applied to describing firms' investment decisions in the presence of capital market imperfections.

Keywords: financial constraints; heterogeneous panel; investment; misspecification test; nonlinear modelling of panel data; smooth transition model.

JEL-codes: C12; C23; C52; G31; G32

33 pages, First version: August 17, 2005. Revised: October 11, 2017. Earlier revisions: October 11, 2017.

Full text files 

hastef0604.pdf PDF-file Full text

Download statistics

Questions (including download problems) about the papers in this series should be directed to Helena Lundin ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:hhs:hastef:0604This page generated on 2024-09-13 22:19:41.