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Criterion-based inference for GMM in autoregressive panel-data models

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Author Info
Steve Bond () (Institute for Fiscal Studies and Nuffield College, Oxford)
Clive Bowsher
Frank Windmeijer () (Institute for Fiscal Studies and University of Bristol)

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Abstract

In this paper we examine the properties of a simple criterion-based, likelihood ratio type test of parameter restristions for standard GMM estimators in autoregressive panel data models. A comparison is made with recent test proposals based in the continuously-updated GMM criterion (Hansen, Heaton and Yaron, 1996) or exponential tilting parameters (Imbens, Spady and Johnson, 1998). The likelihood ratio type statistic is computed simply as the difference between the standard GMM tests of overidentifying restrictions in the restricted and unrestricted models. In Monte Carlo simulations we find thsi test had similar properties to the criterion-based alternatives, whilst being much simpler to compute. All three criterion-based tests outperform conventional Wald tests in this context.

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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W01/02.

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Length: 15 pp
Date of creation: Feb 2001
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Handle: RePEc:ifs:ifsewp:01/02

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Related research
Keywords: Generalised Method of Moments; Hypothesis testing; Panel data;

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Find related papers by JEL classification:
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data

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