Estimation and Statistical Inference for Short Panel Models with Both Interactive Effects and Threshold Effects

Yimeng Xie is a PhD candidate in economics of University of Southern California. His research interests include Econometric Theory, Applied Econometrics, Empirical Finance. He will join Xiamen University as an assistant professor in Fall 2021.

This paper studies short panel threshold model that has cross sectional dependence. We propose the estimator of both coefficients and threshold parameter and also a test of threshold in the model, both of which do not need estimating factors. The asymptotic theory and inference are given and supported by Monte Carlo simulations. We apply our estimator to reexamine how debt level can influence firm's investment ability.