Abstract
This article studies nonlinear, threshold, models in which some of the regressors can be endogenous. An estimation strategy based on instrumental variables was originally developed for dynamic panel models and we extend it to time series models. We apply this methodology to a forward-looking Taylor rule, where nonlinearity is introduced via inflation thresholds.
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Koustas, Z., Lamarche, JF. Instrumental variable estimation of a nonlinear Taylor rule. Empir Econ 42, 1–20 (2012). https://doi.org/10.1007/s00181-010-0411-6
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DOI: https://doi.org/10.1007/s00181-010-0411-6