IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Consistent Inference in Models Defined by COnditional Moment Restrictions: an Alternative to GMM

  • Manuel Dominguez


    (Facultad de Ciencias Economicas y EMpresariales, Universidad COmplutense de Madrid)

  • Ignacio Lobato


    (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))

This article introduces a unified methodology for estimating and testing nonlinear econometric models defined by conditional moment restrictions. These models are very common in econometrics, such as nonlinear rational expectation models. The current approach for inference in these models is the generalized method of moments (GMM) methodology, as proposed by Hansen and Singleton (1982). Although GMM provides a unified methodology for statistical inference that is simple to implement, it may yield inconsistent statistical procedures because it just employs a finite number of moments. This is a very important theoretical and applied problem, as illustrated by a simplified consumption-based asset pricing model. Contrary to GMM, the methodology proposed in this article delivers consistent statistical procedures because it employs an infinite number of moments that characterizes the conditional moment. In addition, the proposed methodology is widely applicable for general time series data and easy to implement. In particular, the proposed specification test relies on a novel and very simple wild bootstrap procedure.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Centro de Investigacion Economica, ITAM in its series Working Papers with number 1005.

in new window

Length: 42 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:cie:wpaper:1005
Contact details of provider: Postal: Camino a Sta. Teresa 930, Mexico, D.F. 10700
Phone: +525 628 4197
Fax: +525 628 4058
Web page:

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.:

as in new window
  1. Pascal Lavergne & Valentin Patilea, 2008. "Smooth Minimum Distance Estimation and Testing in Conditional Moment Restrictions Models: Uniform in Bandwidth Theory," Discussion Papers dp08-08, Department of Economics, Simon Fraser University.
  2. Constantinides, George M, 1990. "Habit Formation: A Resolution of the Equity Premium Puzzle," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 519-43, June.
  3. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March.
  4. James G. MacKinnon, 2006. "Bootstrap Methods in Econometrics," Working Papers 1028, Queen's University, Department of Economics.
  5. Youngki Shin, 2008. "Semiparametric estimation of the Box--Cox transformation model," Econometrics Journal, Royal Economic Society, vol. 11(3), pages 517-537, November.
  6. Allan W. Gregory & Jean-Francois Lamarche & Gregor W. Smith, 2001. "Information-Theoretic Estimation of Preference Parameters: Macroeconomic Applications and Simulation Evidence," Working Papers 1249, Queen's University, Department of Economics.
  7. Horowitz, J.L., 1992. "Testing a Parametric Model Against a Semiparametric Alternative," Papers 9219, Tilburg - Center for Economic Research.
  8. Wooldridge, Jeffrey M., 1990. "A Unified Approach to Robust, Regression-Based Specification Tests," Econometric Theory, Cambridge University Press, vol. 6(01), pages 17-43, March.
  9. Escanciano, J. Carlos, 2006. "Goodness-of-Fit Tests for Linear and Nonlinear Time Series Models," Journal of the American Statistical Association, American Statistical Association, vol. 101, pages 531-541, June.
  10. Stinchcombe, Maxwell B. & White, Halbert, 1998. "Consistent Specification Testing With Nuisance Parameters Present Only Under The Alternative," Econometric Theory, Cambridge University Press, vol. 14(03), pages 295-325, June.
  11. Hansen, Lars Peter & Singleton, Kenneth J, 1982. "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 50(5), pages 1269-86, September.
  12. Bierens, Herman J., 1982. "Consistent model specification tests," Journal of Econometrics, Elsevier, vol. 20(1), pages 105-134, October.
  13. Tauchen, George, 1985. "Diagnostic testing and evaluation of maximum likelihood models," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 415-443.
  14. Carrasco, Marine & Florens, Jean-Pierre, 2000. "Generalization Of Gmm To A Continuum Of Moment Conditions," Econometric Theory, Cambridge University Press, vol. 16(06), pages 797-834, December.
  15. James H. Stock & Jonathan Wright, 2000. "GMM with Weak Identification," Econometrica, Econometric Society, vol. 68(5), pages 1055-1096, September.
  16. Epstein, Larry G & Zin, Stanley E, 1989. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica, Econometric Society, vol. 57(4), pages 937-69, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cie:wpaper:1005. 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: (Diego Dominguez)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.