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Reliable Inference For Gmm Estimators? Finite Sample Properties Of Alternative Test Procedures In Linear Panel Data Models

  • Stephen Bond
  • Frank Windmeijer

We compare the finite sample performance of a range of tests of linear restrictions for linear panel data models estimated using the generalized method of moments (GMM). These include standard asymptotic Wald tests based on one-step and two-step GMM estimators; two bootstrapped versions of these Wald tests; a version of the two-step Wald test that uses a finite sample corrected estimate of the variance of the two-step GMM estimator; the LM test; and three criterion-based tests that have recently been proposed. We consider both the AR(1) panel model and a design with predetermined regressors. The corrected two-step Wald test performs similarly to the standard one-step Wald test, whilst the bootstrapped one-step Wald test, the LM test, and a simple criterion-difference test can provide more reliable finite sample inference in some cases.

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Article provided by Taylor & Francis Journals in its journal Econometric Reviews.

Volume (Year): 24 (2005)
Issue (Month): 1 ()
Pages: 1-37

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Handle: RePEc:taf:emetrv:v:24:y:2005:i:1:p:1-37
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