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Monte Carlo Test Applied to Models Estimated by Indirect Inference

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Author Info

  • Jean-Marie Dufour

    (Universite de Montreal)

  • Pascale Valery

    (Universite de Montreal)

Abstract

In this paper, we propose finite-sample inference procedures for parametric econometric models whose likelihood function is intractable and require simulation-based estimation methods, like indirect inference (Gourieroux, Monfort and Renault, 1993) or the efficient method of moments (Gallant and Tauchen, 1996). The procedures proposed are based on extensions of the technique of Monte Carlo tests which applies naturally to any model that can simulated. In particular, we show that the method of maximized Monte Carlo tests allows to control perfectly the level of test procedures for which only asymptotic justifions are typically proposed. The technique is applied to inference on stochastic differential equations.

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1667.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:1667

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  1. Gallant, A. Ronald & Tauchen, George, 1996. "Which Moments to Match?," Econometric Theory, Cambridge University Press, vol. 12(04), pages 657-681, October.
  2. Jean-Marie Dufour & Jan F. Kiviet, 1998. "Exact Inference Methods for First-Order Autoregressive Distributed Lag Models," Econometrica, Econometric Society, vol. 66(1), pages 79-104, January.
  3. repec:cup:etheor:v:12:y:1996:i:4:p:657-81 is not listed on IDEAS
  4. Jean-Marie Dufour & Lynda Khalaf, 1999. "Simulation Based Finite- and Large-Sample Inference Methods in Simultaneous Equations," Computing in Economics and Finance 1999 824, Society for Computational Economics.
  5. Bansal, Ravi & Gallant, A. Ronald & Hussey, Robert & Tauchen, George, 1995. "Nonparametric estimation of structural models for high-frequency currency market data," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 251-287.
  6. Dufour, Jean-Marie, 2006. "Monte Carlo tests with nuisance parameters: A general approach to finite-sample inference and nonstandard asymptotics," Journal of Econometrics, Elsevier, vol. 133(2), pages 443-477, August.
  7. Jean-Marie Dufour & Linda Khalaf, . "Simulation Based Finite and Large Sample Inference Methods in Multiple Regression Models," Computing in Economics and Finance 1997 141, Society for Computational Economics.
  8. Dufour, J.M. & Kiviet, J.F., 1995. "Exact Tests in Single Equation Autoregressive Distributed Lag Models," Cahiers de recherche 9549, Universite de Montreal, Departement de sciences economiques.
  9. Gourieroux, C & Monfort, A & Renault, E, 1993. "Indirect Inference," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(S), pages S85-118, Suppl. De.
  10. Dufour, Jean-Marie & Kiviet, Jan F., 1996. "Exact tests for structural change in first-order dynamic models," Journal of Econometrics, Elsevier, vol. 70(1), pages 39-68, January.
  11. Andersen, Torben G. & Chung, Hyung-Jin & Sorensen, Bent E., 1999. "Efficient method of moments estimation of a stochastic volatility model: A Monte Carlo study," Journal of Econometrics, Elsevier, vol. 91(1), pages 61-87, July.
  12. Jean-Marie Dufour, 1997. "Some Impossibility Theorems in Econometrics with Applications to Structural and Dynamic Models," Econometrica, Econometric Society, vol. 65(6), pages 1365-1388, November.
  13. Goffe, William L. & Ferrier, Gary D. & Rogers, John, 1994. "Global optimization of statistical functions with simulated annealing," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 65-99.
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Cited by:
  1. Khalaf, Lynda & Saphores, Jean-Daniel & Bilodeau, Jean-François, 2000. "Simulation-Based Exact Tests with Unidentified Nuisance Parameters under the Null Hypothesis : the Case of Jumps Tests in Model with Conditional Heteroskedasticity," Cahiers de recherche 0004, Université Laval - Département d'économique.

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