Abstract :
Most work in the area of nonlinear econometric modeling is based on a single equation
and assumes exogeneity of the explanatory variables. Recently, work by Caner
and Hansen (2004) and Psaradakis, Sola, and Spagnolo (2005) has considered the
possibility of estimating nonlinear models by methods that take into account endogeneity
but provide no tests for exogeneity. This paper examines the problem of
testing for exogeneity in nonlinear threshold models.We suggest new Hausman-type
tests and discuss the use of the bootstrap to improve the properties of asymptotic
tests. The theoretical properties of the tests are discussed and an extensive Monte
Carlo study is undertaken.
