Presence Of Threshold Effects Research Articles

Institutions and economic development: new measurements and evidence

We propose a new set of indices to capture the multidimensionality of a country’s institutional setting. Our indices are obtained by employing a dimension reduction approach on the institutional variables provided by the Fraser Institute (2018). We estimate the impact that institutions have on the level and the growth rate of per capita GDP, using a large sample of countries over the period 1980–2015. To identify the causal effect of our institutional indices on a country’s GDP we employ the Generalized Propensity Score method. Institutions matter especially in low- and middle-income countries, and not all institutions are alike for economic development. We also document non-linearities in the causal effects that different institutions have on growth and the presence of threshold effects.

Abstract P147: Dietary Protein Elicits A Leucine-mediated Threshold Effect On Monocyte/macrophage Mtorc1-autophagy Signaling Resulting In Elevated Cardiovascular Risk

High-protein intake is common in Western societies and generally considered healthy. However, results from some epidemiological studies suggest elevated protein intake is associated with increased risk for ischemic cardiovascular diseases. In addition, results from studies conducted in mice show that a high protein, compared with a standard Western diet, increases atherosclerosis burden and lesion complexity. The adverse effect of protein ingestion on plaque biology in mice is mediated by amino acid-mammalian target of rapamycin (mTOR)-dependent inhibition of autophagy in macrophages. Here, we evaluate the effect of graded amounts of protein ingestion on this amino acid-mTORC1-autophagy mechanism in human monocytes/macrophages and identify leucine as the key amino acid responsible for activating mTORC1 in macrophages. We describe the presence of a threshold effect of high protein intake on this deleterious signaling pathway wherein protein content greater than about 22% of total energy, which is consumed by nearly 1/4 th of the population in Western societies, acutely activates mTORC1 signaling in monocytes/macrophages. Furthermore, we identify leucine as the critical amino acid modulator and threshold indicator, capable of the dose-dependent mTORC1 activation and downstream functional effects. Finally, by designing specific mouse diets with protein contents mimicking graded levels of protein ingestion in our study participants, we demonstrate the presence of a dietary protein threshold effect in driving atherosclerosis in mouse models. These data demonstrate the potential deleterious impact of excessive protein intake on macrophages and atherosclerotic plaque progression.

Factor-augmented forecasting regressions with threshold effects

Summary This paper introduces a factor-augmented forecasting regression model in the presence of threshold effects. We consider least squares estimation of the regression parameters and establish asymptotic theories for estimators of both slope coefficients and the threshold parameter. Prediction intervals are also constructed for factor-augmented forecasts. Moreover, we develop a likelihood ratio statistic for tests on the threshold parameter and a sup-Wald test statistic for tests on the presence of threshold effects, respectively. Simulation results show that the proposed estimation method and testing procedures work very well in finite samples. Finally, we demonstrate the usefulness of the proposed model through an application to forecasting stock market returns.

Institutions and Economic Development: New Measurements and Evidence

We propose a new set of indices to capture the multidimensionality of a country’s institutional quality. Our indices are obtained by employing a dimension reduction approach on the institutional variables provided by the Frazer Institute (2018). We estimate the impact that our measures of institutional quality have on the level and the growth rate of per capita GDP, using a large sample of countries over the period 1980-2015. To identify the causal effect of our measures of institutional quality on a country’s GDP dynamics we employ the Generalized Propensity Score method. Institutions matter especially in low- and middle-income countries, and not all institutions are alike for economic development. For this group of countries, we find: i) a positive correlation between our main institutional index and the GDP growth and ii) that improvement in the reliability and fairness of the legal system leads to a higher long-run per capita GDP level. We also document non-linearities in the causal effects that different institutions have on growth, and the presence of threshold effects.

Tomography of scaling.

Scaling describes how a given quantity Y that characterizes a system varies with its size P. For most complex systems, it is of the form with a non-trivial value of the exponent β, usually determined by regression methods. The presence of noise can make it difficult to conclude about the existence of a nonlinear behaviour with β ≠ 1 and we propose here to circumvent fitting problems by investigating how two different systems of sizes P1 and P2 are related to each other. This leads us to define a local scaling exponent βloc that we study versus the ratio P2/P1 and provides some sort of 'tomography scan' of scaling across different values of the size ratio, allowing us to assess the relevance of nonlinearity in the system and to identify an effective exponent that minimizes the error for predicting the value of Y. We illustrate this method on various real-world datasets for cities and show that our method reinforces in some cases the standard analysis, but is also able to provide new insights in inconclusive cases and to detect problems in the scaling form such as the absence of a single scaling exponent or the presence of threshold effects.

Inference for Factor-Augmented Forecasting Regressions Under Structural Instability

This paper introduces a factor-augmented forecasting regression model in the presence of threshold effects. We consider least squares estimation of the regression parameters, and establish asymptotic theories for estimators of both slope coefficients and the threshold parameter. Prediction intervals are also constructed for factor-augmented forecasts. Moreover, we develop a likelihood ratio statistic for tests on the threshold parameter and a sup-Wald test statistic for tests on the presence of threshold effects, respectively. Simulation results show that the proposed estimation method and testing procedures work very well in finite samples. Finally, we demonstrate the usefulness of the proposed model through applications to forecasting stock market returns and the annual growth rate of industrial production, respectively.

Changes of Relation in Multi-Population Mortality Dependence: An Application of Threshold VECM

Standardized longevity risk transfers often involve modeling mortality rates of multiple populations. Some researchers have found that mortality indexes of selected countries are cointegrated, meaning that a linear relationship exists between the indexes. Vector error correction model (VECM) was used to incorporate this relation, thereby forcing the mortality rates of multiple populations to revert to a long-run equilibrium. However, the long-run equilibrium may change over time. It is crucial to incorporate these changes such that mortality dependence is adequately modeled. In this paper, we develop a framework to examine the presence of equilibrium changes and to incorporate these changes into the mortality model. In particular, we focus on equilibrium changes caused by threshold effect, the phenomenon that mortality indexes alternate between different VECMs depending on the value of a threshold variable. Our framework comprises two steps. In the first step, a statistical test is performed to examine the presence of threshold effect in the VECM for multiple mortality indexes. In the second step, threshold vector error correction model (TVECM) is fitted to the mortality indexes and model adequacy is evaluated. We illustrate this framework with the mortality data of England and Wales (EW) and Canadian populations. We further apply the TVECM to forecast future mortalities and price an illustrative longevity bond with multivariate Wang transform. Our numerical results show that TVECM predicted much faster mortality improvement for EW and Canada than single-regime VECM and thus the incorporation of threshold effect significant increases longevity bond price.

Effect of procurement policy on aid inflows in the Pacific: accounting for economic growth and financial development in Fiji

We examine the impact of public procurement policy on aid inflows, in Fiji, a small developing island economy in the Pacific. Prior to 2010, Fiji did not have a strong and detailed public procurement policy. Therefore, in the study, we examine the short-run and long-run impact of adopting an improved (new) public procurement policy on the aid inflows from the bilateral donors: Australia, United Nations (UN), European Union (EU), Japan, Korea Republic, France, and Germany. The autoregressive distributed lag (ARDL) procedure is used to examine cointegration and the subsequent short-run and long-run effects. Additionally, the model incorporates per capita income, financial development, and crisis as a structural dummy; and the presence of threshold effect on aid inflows is examined. The results show that procurement legislation, financial development, per capita income and crisis have a long-run association with the aid inflows. New public procurement legislation has a positive effect on aid inflows from Australia, EU, Germany and the overall aid. In short-run, procurement legislation has a positive effect on aid inflows from Korea Republic only; and the new procurement policy and financial development have a long-run positive effect on aid inflows to Fiji. Overall, improved procurement policies, a well-developed financial sector development and a reasonable level of growth will bolster aid inflows whereas political uncertainty and global financial crisis retard aid inflows. DOI: http://dx.doi.org/10.5755/j01.ee.28.5.17292

Threshold effects and renormalization group evolution of neutrino parameters in TeV scale seesaw models

We consider the threshold effect on the renormalization group (RG) evolution of the neutrino masses and mixing angles in TeV scale seesaw models. We obtain the analytic expressions using the factorization method in the presence of threshold effects. We also perform numerical study of RG effects in two specific low scale seesaw models following the bottom-up approach and ascertain the role of seesaw thresholds in altering the values of masses and mixing angles during RG evolution.

Real-Time Mobile Geo-Conquesting Promotions

As consumers spend more time on their mobile devices at various locations, a focal retailer’s natural approach is to target potential customers in close proximity to its own location. Yet focal location targeting may cannibalize profits on infra-marginal sales. This study demonstrates the effectiveness of competitive locational targeting, the practice of promoting to consumers near a competitor’s location. The analysis is based on a randomized field experiment in which mobile promotions were sent to customers at three similar locations (competitive, focal, and neutral) in shopping malls. The results show that competitive locational targeting has the potential to take advantage of heightened demand that a focal retailer would not otherwise capture. Competitive locational targeting produced increasing returns to promotional discount depth, indicating the presence of threshold effects. In comparison, targeting a retailer’s own location produced decreasing returns to deep discounts, indicating saturation effects and profit cannibalization. These findings are important for marketers, who can use competitive locational targeting to profit from incremental sales while preserving margins on sales to consumers near their own locations. Locational targeting has enormous potential as a competitive weapon that allows a retailer to maintain a presence anywhere – including on a competitor’s doorstep.

Price Dynamics under the presence of Threshold Effects in WTI Crude Oil Markets

We analyzed long-run adjustment process to equilibrium and short-run dynamics with WTI spot and futures prices using bivariate 3-regime TVECM. After dividing the entire sample period into 5 sub-samples, we applied this model to each sub-sample. This allows us to figure out the differentiable effects of market conditions which can vary by sub-samples and regimes, on investors' behaviors. The estimation results showed quite interesting points. First, the middle regimes of all 5 sub-samples were not targeted by investors, so we could find their activities only in lower and/or upper regimes. Second, we can make 3 different groups with 5 sub-samples. Period 1 showed brisk movements in futures markets under the price information leadership of spot markets and relatively longer adjustment time compared to the other 4 periods. Period 2, 3, and 4 showed the opposite phenomena to period 1 probably caused by sporadic big shocks on world economy. Period 5 showed mixed results in lower and upper regimes. We could analyze quite differentiable and opposite adjustments according to regimes in this period even under the dominated contango condition, which could be regarded as the precious harvest of employing a bivariate 3-regime TVECM in this paper.

Optimal Management and Differential Games in the Presence of Threshold Effects - The Shallow Lake Model

Abstract: In this article we analyze how the presence of thresholds influences multi agent decision making situations. We introduce a class of discounted autonomous optimal control problems with threshold effects and discuss tools to analyze these problems. Later, using these results we investigate two types of threshold effects; namely, simple and hysteresis switching, in the canonical model of the shallow lake. We solve the optimal management and open loop Nash equilibrium solutions for the shallow lake model with threshold effects. We establish a bifurcation analysis of the optimal vector field. Further, we observe that modeling with threshold effects simplifies this analysis. To be precise, the bifurcation scenarios rely on simple rules (inequalities) which can be verified easily. However, the qualitative behavior of the switching vector field is similar to the smooth case.

Threshold Autoregressions Under Near Integratedness

We explore the properties of a Wald type test statistic for detecting the presence of threshold effects in time series when the underlying process could be nearly integrated as opposed to having an exact unit root. We derive its limiting distribution and establish its equivalence to a normalised squared Brownian Bridge process. More importantly we show that the limiting random variable no longer depends on the noncentrality parameter characterising the nearly integrated DGP. This is an unusual occurrence which is in stark contrast with the existing literature on conducting inferences with persistent processes under linearity where it is well known that the noncentrality parameter appears in the limiting distribution of test statistics, making them impractical for inference purposes.

Genetic ancestry is associated with subclinical cardiovascular disease in African-Americans and Hispanics from the multi-ethnic study of atherosclerosis.

Differences in cardiovascular disease (CVD) burden exist among racial/ethnic groups in the United States, with African-Americans having the highest prevalence. Subclinical CVD measures have also been shown to differ by race or ethnicity. In the United States, there has been a significant intermixing among racial/ethnic groups creating admixed populations. Very little research exists on the relationship of genetic ancestry and subclinical CVD measures. These associations were investigated in 712 black and 705 Hispanic participants from the Multi-Ethnic Study of Atherosclerosis candidate gene substudy. Individual ancestry was estimated from 199 genetic markers using STRUCTURE. Associations of ancestry and coronary artery calcium (CAC) and common and internal carotid intima media thickness were evaluated using log-binomial and linear regression models. Splines indicated linear associations of ancestry with subclinical CVD measures in African-Americans but presence of threshold effects in Hispanics. Among African-Americans, each SD increase in European ancestry was associated with an 8% (95% CI, 1.02 to 1.15; P=0.01) higher CAC prevalence. Each SD increase in European ancestry was also associated with a 2% (95% CI -3.4% to -0.5%, P=0.008) lower common carotid intima media thickness in African-Americans. Among Hispanics, the highest tertile of European ancestry was associated with a 34% higher CAC prevalence (P=0.02) when compared with the lowest tertile. The linear association of ancestry and subclinical CVD suggests that genetic effects may be important in determining CAC and carotid intima media thickness among African-Americans. Our results also suggest that CAC and common carotid intima media thickness may be important phenotypes for further study with admixture mapping.

Testing Granger Causality in the presence of threshold effects

This paper proposes a Granger Causality test allowing for threshold effects. The proposed test can be conducted on the basis of the threshold autoregressive distributed lag model or the augmented logistic smooth transition autoregressive model. The proposed test is applied to the U.S. civilian unemployment rate, and it is shown that real investment, real GDP and real interest rate are helpful for improving the in-sample fit of unemployment.

Implementing the efficient allocation of a persistent pollutant in the presence of threshold effects

The regulation of a persistent pollutant through a sequence of compensation mechanisms [Varian, H., 1994, A solution to the problem of externalities when agents are well-informed, American Economic Review 85, 1278–1293] involves the unexpected conclusion that it may be optimal to establish lower taxes in response to an increase in the magnitude of a (possible) catastrophe.

Dynamic optimisation in the presence of threshold effects when the location of the threshold is uncertain – with an application to a possible disintegration of the Western Antarctic Ice Sheet

The purpose of this paper is to derive necessary conditions for optimal control in the presence of threshold effects when the threshold is a curve in n -dimensional space of uncertain location. The usefulness of these conditions is shown by examining the optimal regulation of two greenhouse gases when there is a risk that the combined radiative forcing from these two gases may trigger the disintegration of the Western Antarctic ice sheet.

Forecasting inflation using the term structure and MARS

This study revisits the issue of forecasting changes in inflation using non-linear non-parametric methods. The results indicate the presence of threshold effects in the relationship between the information in the term structure and changes in the rate of inflation.

Industrial and environmental specialization

The presence of threshold effects or convex damage functions implies that the composition of pollutants may be as important in the determination of health outcomes as the level of pollution. As such, greater specialization in particular environmental hazards may suggest increasing costs from pollution even if overall pollution levels are declining. Using panel data from the US, it is verified that ‘environmental specialization’ is important, and likely to increase in the future due to greater industrial specialization.

Targeting conservation efforts in the presence of threshold effects and ecosystem linkages

The prevailing federal policy of targeting conservation programs on the basis of physical criteria tends to ignore the threshold effect of conservation efforts and the correlation between alternative environmental benefits. In this article, we examine the extent to which conservation funds will be misallocated when threshold effects and correlated benefits are ignored. We show that targeting conservation efforts based on physical criteria or political equity concerns may actually lead to the lowest possible benefits to society from conservation expenditure. Ignoring correlated benefits may lead not only to misallocation of conservation funds among watersheds, but also to incorrect resources (e.g. land, streams) being targeted for conservation. The empirical analysis focuses on riparian habitat investments for salmon restoration in the Pacific Northwest. We show that a large portion of conservation benefits would be lost when threshold effects and correlated benefits are ignored, and argue that funds should be allocated so that the total value of environmental benefits is maximized, not the total amount of resources protected.