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Empirical likelihood block bootstrapping

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  • Allen, Jason
  • Gregory, Allan W.
  • Shimotsu, Katsumi

Abstract

Monte Carlo evidence has made it clear that asymptotic tests based on generalized method of moments (GMM) estimation have disappointing size. The problem is exacerbated when the moment conditions are serially correlated. Several block bootstrap techniques have been proposed to correct the problem, including Hall and Horowitz (1996) and Inoue and Shintani (2006). We propose an empirical likelihood block bootstrap procedure to improve inference where models are characterized by nonlinear moment conditions that are serially correlated of possibly infinite order. Combining the ideas of Kitamura (1997) and Brown and Newey (2002), the parameters of a model are initially estimated by GMM which are then used to compute the empirical likelihood probability weights of the blocks of moment conditions. The probability weights serve as the multinomial distribution used in resampling. The first-order asymptotic validity of the proposed procedure is proven, and a series of Monte Carlo experiments show it may improve test sizes over conventional block bootstrapping.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 161 (2011)
Issue (Month): 2 (April)
Pages: 110-121

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Handle: RePEc:eee:econom:v:161:y:2011:i:2:p:110-121

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Web page: http://www.elsevier.com/locate/jeconom

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Keywords: Generalized methods of moments Empirical likelihood Block bootstrap;

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References

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Citations

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Cited by:
  1. Bravo, Francesco & Crudu, Federico, 2012. "Efficient bootstrap with weakly dependent processes," Computational Statistics & Data Analysis, Elsevier, vol. 56(11), pages 3444-3458.
  2. Franke, Reiner, 2013. "Competitive Moment Matching of a New-Keynesian and an Old-Keynesian Model," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79988, Verein für Socialpolitik / German Economic Association.
  3. Lorenzo Camponovo & Taisuke Otsu, 2014. "Robustness of bootstrap in instrumental variable regression," STICERD - Econometrics Paper Series /2014/572, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  4. Seojeong Lee, 2014. "Asymptotic Refinements of a Misspecification-Robust Bootstrap for GEL Estimators," Discussion Papers 2014-02, School of Economics, The University of New South Wales.

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