The large sample behaviour of the generalized method of moments estimator in misspecified models
AbstractThis paper presents the limiting distribution theory for the GMM estimator when the estimation is based on a population moment condition which is subject to non--local (or fixed) misspecification. It is shown that if the parameter vector is overidentified then the weighting matrix plays a far more fundamental role than it does in the corresponding analysis for correctly specified models. Specifically, the rate of convergence of the estimator depends on the rate of convergence of the weighting matrix to its probability limit. The analysis is presented for four particular choices of weighting matrix which are commonly used in practice. In each case the limiting distribution theory is different, and also different from the limiting distribution in a correctly specified model. Statistics are proposed which allow the researcher to test hypotheses about the parameters in misspecified models.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Econometrics.
Volume (Year): 114 (2003)
Issue (Month): 2 (June)
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Other versions of this item:
- Alastair R. Hall & Atsushi Inoue, 2005. "The Large Sample Behaviour of the Generalized Method of Moments Estimator in Misspecified Models," Econometrics 0505002, EconWPA.
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
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