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Method‐of‐moment view of linear simultaneous equation systems

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  • Myoung‐jae Lee

Abstract

In this paper, we review the modern method‐of‐moment‐based approaches to identification and estimation of linear simultaneous equation systems. First, we present the rank condition for the structural form (SF) parameter identification. The rank condition comes naturally and is much easier to understand than that in the conventional reduced‐form‐based indirect approach. Then, we show how to estimate all SF parameters jointly (in a single step) with method‐of‐moment estimators. As it turns out, using only unconditional moments, but not any conditional moments, greatly simplifies the identification and estimation issues, and makes light work of conveying the essential ideas involved.

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  • Myoung‐jae Lee, 2008. "Method‐of‐moment view of linear simultaneous equation systems," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 62(2), pages 230-238, May.
    • Handle: RePEc:bla:stanee:v:62:y:2008:i:2:p:230-238
    DOI: 10.1111/j.1467-9574.2007.00383.x
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    1. Andrews, Donald W. K., 1987. "Asymptotic Results for Generalized Wald Tests," Econometric Theory, Cambridge University Press, vol. 3(3), pages 348-358, June.
    2. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    3. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119, Decembrie.
    4. Myoung-jae Lee & Pao-Li Chang, 2007. "Avoiding arbitrary exclusion restrictions using ratios of reduced-form estimates," Empirical Economics, Springer, vol. 33(2), pages 339-357, September.
    5. Myoung-Jae Lee & Ayal Kimhi, 2005. "Simultaneous equations in ordered discrete responses with regressor-dependent thresholds," Econometrics Journal, Royal Economic Society, vol. 8(2), pages 176-196, July.
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    Cited by:

    1. Changhui Kang & Myoung-jae Lee, 2014. "Estimation of Binary Response Models With Endogenous Regressors," Pacific Economic Review, Wiley Blackwell, vol. 19(4), pages 502-530, October.

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