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Testing for weak identification in possibly nonlinear models

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  • Inoue, Atsushi
  • Rossi, Barbara

Abstract

In this paper we propose a chi-square test for identification. Our proposed test statistic is based on the distance between two shrinkage extremum estimators. The two estimators converge in probability to the same limit when identification is strong, and their asymptotic distributions are different when identification is weak. The proposed test is consistent not only for the alternative hypothesis of no identification but also for the alternative of weak identification, which is confirmed by our Monte Carlo results. We apply the proposed technique to test whether the structural parameters of a representative Taylor-rule monetary policy reaction function are identified.

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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: 246-261

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Handle: RePEc:eee:econom:v:161:y:2011:i:2:p:246-261

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

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Keywords: GMM Shrinkage Weak identification;

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Cited by:
  1. Xiaohong Chen & David T. Jacho-Chavez & Oliver Linton, 2012. "Averaging of moment condition estimators," CeMMAP working papers CWP26/12, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  2. Dufour, Jean-Marie & Khalaf, Lynda & Kichian, Maral, 2013. "Identification-robust analysis of DSGE and structural macroeconomic models," Journal of Monetary Economics, Elsevier, vol. 60(3), pages 340-350.
  3. Zisimos Koustas & Jean-Francois Lamarche, 2009. "Instrumental variable estimation of a nonlinear Taylor rule," Working Papers 0909, Brock University, Department of Economics, revised Jul 2010.
  4. Rachida Ouysse, 2014. "On the performance of block-bootstrap continuously updated GMM for a class of non-linear conditional moment models," Computational Statistics, Springer, vol. 29(1), pages 233-261, February.
  5. Nikolay Iskrev, 2010. "Evaluating the strength of identification in DSGE models. An a priori approach," 2010 Meeting Papers 1117, Society for Economic Dynamics.

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