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Corrected standard errors for optimal minimum distance estimator

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  • Hayakawa, Kazuhiko

Abstract

This paper compares three types of standard errors for optimal minimum distance (OMD) estimator where the structural parameter is recovered from the reduced form parameters estimated by a two-step GMM estimator. We demonstrate that the naive standard errors are severely biased and cause over-rejection, while the OMD estimator based on the bias-corrected variance matrix by Windmeijer (2005) and newly derived variance estimator yield much more accurate inference.

Suggested Citation

  • Hayakawa, Kazuhiko, 2018. "Corrected standard errors for optimal minimum distance estimator," Economics Letters, Elsevier, vol. 167(C), pages 5-9.
    • Handle: RePEc:eee:ecolet:v:167:y:2018:i:c:p:5-9
    DOI: 10.1016/j.econlet.2018.02.029
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    References listed on IDEAS

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    More about this item

    Keywords

    Standard error; Minimum distance estimator; Panel data model; Serial correlation; Interactive fixed effects;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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