PANELTHRESH Procedure

@PANELTHRESH tests a fixed effects regression for one or two breaks in a single regressor, with breaks determined by the values of another variable. This is from Bruce Hansen(1999).

The regression (with two breaks) takes the form:

\({y_{i,t}} = {a_i} + {x_{i,t}}\beta + {z_{i,t}}\left( {{q_{i,t}} \le {\gamma _1}} \right) + {z_{t,i}}\left( {{q_{i,t}} \le {\gamma _2}} \right)\)

This requires a separate fixed effects regression for each test setting for the break values. If \(q\) is a continuous variable, a complete search over all possible values in a panel data set could be very time consuming. As a result, you can examine a reduced number of quantiles of the values of \(q\). It also only does an exhaustive search for the first break, then examines the second break given the first.

@PanelThresh( options ) depvar start end

# list of regressors(omit CONSTANT)

Parameters

depvar	dependent variable
start, end	range for regression. By default, the maximum range permitted by all variables involved in the regression.

Options

THRESHVAR=series that determines the breaks [required]

BREAKVAR =series that is dummied out at the break

QN=number of quantiles of the threshold variable to examine.[max(400,actual values)]

T1=trimming fraction on ends for first threshold [.01]

[PRINT]/NOPRINT

TITLE=title for report ["Panel Threshold Analysis, Threshold Variable xxx"]