The choice of threshold

[guo]

Dear Tom

Thank you very much for your always instant and useful reply.

Concerning on choosing threshold, in a 5-var SVAR, take inflation rate as a example, do you prefer current inflation rate or lagged inflation rate?

If you prefer lagged inflation rate as a threshold, how to choose the lag length?

I am looking forward to your kind suggestions.

Best Regards

guo

[TomDoan]

Dear Tom

Thank you very much for your always instant and useful reply.

Concerning on choosing threshold, in a 5-var SVAR, take inflation rate as a example, do you prefer current inflation rate or lagged inflation rate?

If you prefer lagged inflation rate as a threshold, how to choose the lag length?

I am looking forward to your kind suggestions.

Best Regards

guo

If inflation is one of your endogenous variables, it can't be current inflation. If it's an exogenous variable, it can be either current or any lag. You choose which lag by trying the different values and seeing which fits better.

[guo]

Dear Tom,

Always thank you for your kind and instant reply.

Best Regards

guo