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A mixture of ordered probit models with endogenous switching between two latent classes

Author

Listed:
  • Jochem Huismans

    (University of Amsterdam)

  • Jan Willem Nijenhuis

    (Nedap NV)

  • Andrei Sirchenko

    (Nyenrode Business University)

Abstract

Ordinal responses can be generated, in a cross-sectional context, by different unobserved classes of population or, in a time-series context, by differ- ent latent regimes. We introduce a new command, swopit, that fits a mixture of ordered probit models with exogenous or endogenous switching between two latent classes (regimes). Switching is endogenous if unobservables in the class- assignment model are correlated with unobservables in the outcome models. We provide a battery of postestimation commands; assess via Monte Carlo experiments the finite-sample performance of the maximum likelihood estimator of the param- eters, probabilities, and their standard errors (both the asymptotic and bootstrap ones); and apply the new command to model the monetary policy interest rates.

Suggested Citation

  • Jochem Huismans & Jan Willem Nijenhuis & Andrei Sirchenko, 2022. "A mixture of ordered probit models with endogenous switching between two latent classes," Stata Journal, StataCorp LP, vol. 22(3), pages 557-596, September.
    • Handle: RePEc:tsj:stataj:y:22:y:2022:i:3:p:557-596
    DOI: 10.1177/1536867X221124516
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