Work in Progress

Panel Thresholds Predictive Regressions: An Application to Emerging Market Exchange Rates

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A methodology is proposed for identifying threshold effects in panel predictive regressions in which the predictor variables are strongly persistent. Our statistic of interest is the average of individual \textit{supremum} type statistics across the units of the panel. In certain cases, this statistic converges to a standard distribution while in other cases we show that a block bootstrap methodology can be applied and offers good finite sample characteristics when cross sectional dependence and serial correlation are present. This methodology is applied to assess the existence of threshold effects in an exchange rate predictability setting for emerging Sub-Saharan African economies during the post-2008 crisis period.

Robert A. Hill
Robert A. Hill
PhD Candidate at Nova School of Business and Economics