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The optimal choice of moments in dynamic panel data models

  • Okui, Ryo
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This paper derives an approximation of the mean square error (MSE) of the GMM estimator in dynamic panel data models. The approximation is based on higher-order asymptotic theory under double asymptotics. While first-order theory under double asymptotics provides information about the bias, it does not provide enough information about the variance of the estimator. Higher-order theory enables us to obtain information about the variance. From this result, a procedure for choosing the number of instruments is proposed. The simulations confirm that the proposed procedure improves the precision of the estimator.

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File URL: http://www.sciencedirect.com/science/article/pii/S0304-4076(09)00110-9
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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 151 (2009)
Issue (Month): 1 (July)
Pages: 1-16

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Handle: RePEc:eee:econom:v:151:y:2009:i:1:p:1-16
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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