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Complementary Bayesian method of moments strategies

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  • A. Ronald Gallant

Abstract

Methodology is proposed that addresses two problems that arise in application of the generalized method of moments representation of the likelihood in Bayesian inference: (1) a missing Jacobian term and (2) a normality assumption. The proposals are illustrated by application to the seminal application of the generalized method of moments methodology in the econometric literature: an endowment economy whose representative agent has constant relative risk aversion utility.

Suggested Citation

  • A. Ronald Gallant, 2020. "Complementary Bayesian method of moments strategies," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 35(4), pages 422-439, June.
    • Handle: RePEc:wly:japmet:v:35:y:2020:i:4:p:422-439
    DOI: 10.1002/jae.2758
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    References listed on IDEAS

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    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Chernozhukov, Victor & Hong, Han, 2003. "An MCMC approach to classical estimation," Journal of Econometrics, Elsevier, vol. 115(2), pages 293-346, August.
    3. Christopher A. Sims, 2016. "Comment on: Reflections on the Probability Space Induced by Moment Conditions with Implications for Bayesian Inference," Journal of Financial Econometrics, Oxford University Press, vol. 14(2), pages 272-277.
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    5. Gallant, Ronald & Tauchen, George, 1989. "Seminonparametric Estimation of Conditionally Constrained Heterogeneous Processes: Asset Pricing Applications," Econometrica, Econometric Society, vol. 57(5), pages 1091-1120, September.
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    7. Gallant, A. Ronald & Giacomini, Raffaella & Ragusa, Giuseppe, 2017. "Bayesian estimation of state space models using moment conditions," Journal of Econometrics, Elsevier, vol. 201(2), pages 198-211.
    8. A. Ronald Gallant, 2016. "Reflections on the Probability Space Induced by Moment Conditions with Implications for Bayesian Inference," Journal of Financial Econometrics, Oxford University Press, vol. 14(2), pages 229-247.
    9. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-1445, November.
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    12. A. Ronald Gallant, 2016. "Reflections on the Probability Space Induced by Moment Conditions with Implications for Bayesian Inference — Author Response to Comments," Journal of Financial Econometrics, Oxford University Press, vol. 14(2), pages 284-294.
    13. Han Hong, 2007. "A Statistical Inquiry into the Plausibility of Recursive Utility," Journal of Financial Econometrics, Oxford University Press, vol. 5(4), pages 523-559, Fall.
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    Cited by:

    1. A. Ronald Gallant & George Tauchen, 2021. "Cash Flows Discounted Using a Model-Free SDF Extracted under a Yield Curve Prior," JRFM, MDPI, vol. 14(3), pages 1-15, March.
    2. Gallant, A. Ronald & Hong, Han & Leung, Michael P. & Li, Jessie, 2022. "Constrained estimation using penalization and MCMC," Journal of Econometrics, Elsevier, vol. 228(1), pages 85-106.
    3. Gallant, A. Ronald, 2022. "Nonparametric Bayes subject to overidentified moment conditions," Journal of Econometrics, Elsevier, vol. 228(1), pages 27-38.

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