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Testing In Gmm Models Without Truncation

In: Maximum Likelihood Estimation of Misspecified Models: Twenty Years Later

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  • Timothy J. Vogelsang

Abstract

This paper proposes a new approach to testing in the generalized method of moments (GMM) framework. The new tests are constructed using heteroskedasticity autocorrelation (HAC) robust standard errors computed using nonparametric spectral density estimators without truncation. While such standard errors are not consistent, a new asymptotic theory shows that they lead to valid tests nonetheless. In an over-identified linear instrumental variables model, simulations suggest that the new tests and the associated limiting distribution theory provide a more accurate first order asymptotic null approximation than both standard nonparametric HAC robust tests and VAR based parametric HAC robust tests. Finite sample power of the new tests is shown to be comparable to standard tests.

Suggested Citation

  • Timothy J. Vogelsang, 2003. "Testing In Gmm Models Without Truncation," Advances in Econometrics, in: Maximum Likelihood Estimation of Misspecified Models: Twenty Years Later, pages 199-233, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:aecozz:s0731-9053(03)17010-7
    DOI: 10.1016/S0731-9053(03)17010-7
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    Cited by:

    1. Lui, Yiu Lim & Phillips, Peter C.B. & Yu, Jun, 2024. "Robust testing for explosive behavior with strongly dependent errors," Journal of Econometrics, Elsevier, vol. 238(2).
    2. Shin‐Kun Peng & Takatoshi Tabuchi, 2007. "Spatial Competition in Variety and Number of Stores," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(1), pages 227-250, March.
    3. Lee, Wei-Ming & Kuan, Chung-Ming & Hsu, Yu-Chin, 2014. "Testing over-identifying restrictions without consistent estimation of the asymptotic covariance matrix," Journal of Econometrics, Elsevier, vol. 181(2), pages 181-193.
    4. Majid M. Al-Sadoon, 2014. "A general theory of rank testing," Economics Working Papers 1411, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2015.

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