Threshold Regression for Fixed‐T Panel Data with Interactive Fixed Effects

ABSTRACT This paper develops a new toolbox for estimation and inference in panel data threshold regression models with interactive fixed effects and a fixed number of time periods, . The toolbox is designed to be simple, accurate, and computationally efficient. It is based on a simple least squares style estimator of the model parameters, and includes a number of inferential procedures for testing hypotheses regarding not only the threshold but also other parameters. The new toolbox is applied to study the impact of inflation on economic growth.