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Consistent Model and Moment Selection Criteria for GMM Estimation with Applications to Dynamic Panel Data Models

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Author Info
Donald W.K. Andrews () (Cowles Foundation, Yale University)
Biao Lu (Dept. Finance, Univ. Michigan Business School)

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Abstract

This paper develops consistent model and moment selection criteria for GMM estimation. The criteria select the correct model specification and all correct moment conditions asymptotically. The selection criteria resemble the widely used likelihood-based selection criteria BIC, HQIC, and AIC. (The latter is not consistent.) The GMM selection criteria are based on the J statistic for testing over-identifying restrictions. Bonus terms reward the use of fewer parameters for a given number of moment conditions and the use of more moment conditions for a given number of parameters. The paper applies the model and moment selection criteria to dynamic panel data models with unobserved individual effects. The paper shows how to apply the selection criteria to select the lag length for lagged dependent variables, to detect the number and locations of structural breaks, to determine the exogeneity of regressors, and/or to determine the existence of correlation between some regressors and the individual effect. To illustrate the finite sample performance of the selection criteria and their impact on parameter estimation, the paper reports the results of a Monte Carlo experiment on a dynamic panel data model.

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Publisher Info
Paper provided by Cowles Foundation, Yale University in its series Cowles Foundation Discussion Papers with number 1233.

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Length: 47 pages
Date of creation: Aug 1999
Date of revision:
Publication status: Published in Journal of Econometrics (2001), 101(1): 123-164
Handle: RePEc:cwl:cwldpp:1233

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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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Related research
Keywords: Akaike information criterion; Bayesian information criterion; consistent selection procedure; generalized method of moments estimator; instrumental variables estimator; model selection; moment selection; panel data model; test of over-identifying restrictions;

Find related papers by JEL classification:
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing

References listed on IDEAS
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    Other versions:
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    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Todd Prono, 2006. "GARCH-based identification of triangular systems with an application to the CAPM: still living with the roll critique," Working Papers 07-1, Federal Reserve Bank of Boston. [Downloadable!]
  2. Hans Genberg & Laurent L. Pauwels, 2003. "An Open Economy New Keynesian Phillips Curve: Evidence from Hong Kong," HEI Working Papers 03-2003, Economics Section, The Graduate Institute of International Studies. [Downloadable!]
    Other versions:
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