This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Small Sample Properties of Generalized Method of Moments Based Wald Tests

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Craig Burnside
Martin Eichenbaum

Additional information is available for the following registered author(s):

Abstract

This paper assesses the small sample properties of Generalized Method of Moments (GMM) based Wald statistics. The analysis is conducted assuming that the data generating process corresponds to (i) a simple vector white noise process and (ii) an equilibrium business cycle model. Our key findings are that the small sample size of the Wald tests exceeds their asymptotic size, and that their size increases uniformly with the dimensionality of joint hypotheses. For tests involving even moderate numbers of moment restrictions, the small sample size of the tests greatly exceeds their asymptotic size. Relying on asymptotic distribution theory leads one to reject joint hypothesis tests far too often. We argue that the source of the problem is the difficulty of estimating the spectral density matrix of the GMM residuals, which is needed to conduct inference in a GMM environment. Imposing restrictions implied by the underlying economic model being investigated or the null hypothesis being tested on this spectral density matrix can lead to substantial improvements in the small sample properties of the Wald tests.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/t0155.pdf
File Format: application/pdf
File Function:
Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0155.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: May 1994
Date of revision:
Handle: RePEc:nbr:nberte:0155

Note: EFG
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords:

Other versions of this item:

Find related papers by JEL classification:
C5 - Mathematical and Quantitative Methods - - Econometric Modeling
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing

References listed on IDEAS
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. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22. [Downloadable!]
    Other versions:
  2. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May. [Downloadable!] (restricted)
    Other versions:
  3. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-58, May. [Downloadable!] (restricted)
    Other versions:
  4. Chistiano, Lawrence J & den Haan, Wouter J, 1996. "Small-Sample Properties of GMM for Business-Cycle Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(3), pages 309-27, July.
    Other versions:
  5. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
  6. Robert J. Hodrick & Edward Prescott, 1981. "Post-War U.S. Business Cycles: An Empirical Investigation," Discussion Papers 451, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  7. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November. [Downloadable!] (restricted)
  8. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations," American Economic Review, American Economic Association, vol. 82(3), pages 430-50, June. [Downloadable!] (restricted)
    Other versions:
  9. Andrews, Donald W K & Monahan, J Christopher, 1992. "An Improved Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimator," Econometrica, Econometric Society, vol. 60(4), pages 953-66, July. [Downloadable!] (restricted)
    Other versions:
  10. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November. [Downloadable!] (restricted)
    Other versions:
  11. Kenneth D. West, 1993. "Inventory Models," NBER Technical Working Papers 0143, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Craig Burnside & Martin Eichenbaum, 1994. "Factor Hoarding and the Propagation of Business Cycles Shocks," NBER Working Papers 4675, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  13. Ellen McGrattan & Richard Rogerson & Randall Wright, 1993. "Household production and taxation in the stochastic growth model," Staff Report 166, Federal Reserve Bank of Minneapolis. [Downloadable!]
  14. Jeffrey Fuhrer & George Moore & Scott Schuh, 1993. "Estimating the linear-quadratic inventory model: maximum likelihood versus generalized method of moments," Finance and Economics Discussion Series 93-11, Board of Governors of the Federal Reserve System (U.S.).
    Other versions:
  15. Kocherlakota, Narayana R., 1990. "On tests of representative consumer asset pricing models," Journal of Monetary Economics, Elsevier, vol. 26(2), pages 285-304, October. [Downloadable!] (restricted)
  16. Newey, Whitney K & West, Kenneth D, 1994. "Automatic Lag Selection in Covariance Matrix Estimation," Review of Economic Studies, Blackwell Publishing, vol. 61(4), pages 631-53, October. [Downloadable!] (restricted)
    Other versions:
  17. Gregory, Allan W & Veall, Michael R, 1985. "Formulating Wald Tests of Nonlinear Restrictions," Econometrica, Econometric Society, vol. 53(6), pages 1465-68, November. [Downloadable!] (restricted)
  18. Altug, Sumru, 1989. "Time-to-Build and Aggregate Fluctuations: Some New Evidence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 889-920, November. [Downloadable!] (restricted)
    Other versions:
  19. Christiano, Lawrence J., 1988. "Why does inventory investment fluctuate so much?," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 247-280. [Downloadable!] (restricted)
  20. Eichenbaum, Martin & Hansen, Lars Peter, 1990. "Estimating Models with Intertemporal Substitution Using Aggregate Time Series Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(1), pages 53-69, January.
    Other versions:
  21. Hansen, Lars Peter & Singleton, Kenneth J, 1982. "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 50(5), pages 1269-86, September. [Downloadable!] (restricted)
  22. Tauchen, George, 1986. "Statistical Properties of Generalized Method-of-Moments Estimators of Structural Parameters Obtained from Financial Market Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(4), pages 397-416, October.
Full references

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. Lawrence J. Christiano & Wouter Den Haan, 1995. "Small sample properties of GMM for business cycle analysis," Staff Report 199, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  2. Wouter J. den Haan & Andrew T. Levin, 1995. "Inferences from parametric and non-parametric covariance matrix estimation procedures," International Finance Discussion Papers 504, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  3. Jean-Marie Dufour & Olivier Torrès, 2000. "Markovian Processes, Two-Sided Autoregressions and Finite-Sample Inference for Stationary and Nonstationary Autoregressive Processes," CIRANO Working Papers 2000s-17, CIRANO. [Downloadable!]
    Other versions:
  4. Francesco Bravo, . "Empirical likelihood inference with applications to some econometric models," Discussion Papers 00/05, Department of Economics, University of York. [Downloadable!]
  5. Peter R. Hartley & Joseph A. Whitt, Jr., 1997. "Macroeconomic fluctuations in Europe: demand or supply, permanent or temporary?," Working Paper 97-14, Federal Reserve Bank of Atlanta. [Downloadable!]
  6. Wouter J. Den Haan & Andrew T. Levin, 1996. "A Practitioner's Guide to Robust Covariance Matrix Estimation," NBER Technical Working Papers 0197, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Christopher R. Knittel & Konstantinos Metaxoglou, 2008. "Estimation of Random Coefficient Demand Models: Challenges, Difficulties and Warnings," NBER Working Papers 14080, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Statistics
Access and download statistics

Did you know? To receive notification of recent additions to the database, subscribe to the free NEP reports.

This page was last updated on 2009-11-19.


This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.