Identification and inference in moments based analysis of linear dynamic panel data models
We show that Dif(ference), see Arellano and Bond (1991), Lev(el), see Arellano and Bover (1995) and Blundell and Bond (1998), or the N(on-)L(inear) moment conditions of Ahn and Schmidt (1995) do not identify the parameters of a first-order autoregressive panel data model when the autoregressive parameter is equal to one. Combinations of the Dif and Lev, resulting in Sys(tem), moment conditions and the Dif and NL, resulting in A(hn-)S(chmidt), moment conditions identify the parameters when there are four or more time periods. The behaviour of one step and two step GMM estimators, however, remains non-standard. We therefore use size correct GMM statistics, like, the GMM-AR, GMM-LM or KLM statistic, to conduct inference. We compare their worst case large sample distributions with the power envelope to determine the optimal statistic. The power envelope involves a quartic root convergence rate which further indicates the non-standard identification issues. The worst case large sample distribution of the KLM statistic coincides with the power envelope whilst the one of the GMM-LM statistic only does so when there are four time periods. It shows that the KLM statistic is efficient both when the autoregressive parameter is one or less than one. The power envelopes for the AS and Sys moment conditons are identical so assuming mean stationarity does not help for identification.
|Date of creation:||20 Jun 2013|
|Date of revision:|
|Contact details of provider:|| Postal: Dept. of Econometrics, Universiteit van Amsterdam, Valckenierstraat 65, NL - 1018 XE Amsterdam, The Netherlands|
Web page: http://www.ase.uva.nl/uva-econometrics
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
- Frank Kleibergen, 2002. "Pivotal Statistics for Testing Structural Parameters in Instrumental Variables Regression," Econometrica, Econometric Society, vol. 70(5), pages 1781-1803, September.
- Blundell, Richard & Bond, Stephen, 1998.
"Initial conditions and moment restrictions in dynamic panel data models,"
Journal of Econometrics,
Elsevier, vol. 87(1), pages 115-143, August.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- Javier Alvarez & Manuel Arellano, 2004. "Robust Likelihood Estimation Of Dynamic Panel Data Models," Working Papers wp2004_0421, CEMFI.
- Douglas Staiger & James H. Stock, 1994.
"Instrumental Variables Regression with Weak Instruments,"
NBER Technical Working Papers
0151, National Bureau of Economic Research, Inc.
- Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
- Kruiniger, Hugo, 2009.
"Gmm Estimation And Inference In Dynamic Panel Data Models With Persistent Data,"
Cambridge University Press, vol. 25(05), pages 1348-1391, October.
- Hugo Kruiniger, 2006. "GMM Estimation and Inference in Dynamic Panel Data Models with Persistent Data," Working Papers 560, Queen Mary University of London, School of Economics and Finance.
- Frank Kleibergen, 2005. "Testing Parameters in GMM Without Assuming that They Are Identified," Econometrica, Econometric Society, vol. 73(4), pages 1103-1123, 07.
- Engle, Robert & Granger, Clive, 2015.
"Co-integration and error correction: Representation, estimation, and testing,"
Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Donald W. K. Andrews & Marcelo J. Moreira & James H. Stock, 2006. "Optimal Two-Sided Invariant Similar Tests for Instrumental Variables Regression," Econometrica, Econometric Society, vol. 74(3), pages 715-752, 05.
- Arellano, Manuel & Bover, Olympia, 1995.
"Another look at the instrumental variable estimation of error-components models,"
Journal of Econometrics,
Elsevier, vol. 68(1), pages 29-51, July.
- M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
- Steve Bond & Céline Nauges & Frank Windmeijer, 2005. "Unit roots: identification and testing in micro panels," CeMMAP working papers CWP07/05, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
- Stephen Bond & Frank Windmeijer, 2005. "Reliable Inference For Gmm Estimators? Finite Sample Properties Of Alternative Test Procedures In Linear Panel Data Models," Econometric Reviews, Taylor & Francis Journals, vol. 24(1), pages 1-37.
When requesting a correction, please mention this item's handle: RePEc:ame:wpaper:1307. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Noud P.A. van Giersbergen)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.