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Threshold regression

New estimation command threshold fits threshold regressions. These are linear regressions in which the coefficients change by estimated thresholds. You have one set of coefficients before the first threshold, another set after the first and before the second, and so on. You can specify or estimate the number of threshold points.

The thresholds can be determined on the basis of time; thus threshold regressions are often fit to time-series data.

Or thresholds can be determined on the basis of an exogenous variable. In that case, you would have a set of coefficients when x < the first threshold, another set after the first and before the second, and so on.

The lagged value of the dependent variable is an example of an exogenous variable. In that case, you would have a set of coefficients when l.y < the first threshold, another set after the first and before the second, and so on. This last case is known as the self-exciting threshold model.

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