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Finite Sample Inference for GMM Estimators in Linear Panel Data Models

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  • Stephen Bond

    () (Nuffield College, Oxford)

  • Frank Windmeijer

    () (Institute for Fiscal Studies)

Abstract

We compare the finite sample performance of a range of tests of linear restrictions for linear panel data models estimated using Generalised 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 more accurate asymptotic approximation to the distribution of the estimator; the LM test; and three criterion-bases 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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Suggested Citation

  • Stephen Bond & Frank Windmeijer, 2002. "Finite Sample Inference for GMM Estimators in Linear Panel Data Models," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C6-3, International Conferences on Panel Data.
  • Handle: RePEc:cpd:pd2002:c6-3
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    References listed on IDEAS

    as
    1. Thomas E. MaCurdy, 1981. "Multiple Time-Serie3 Models Applied to Panel Data," NBER Working Papers 0646, National Bureau of Economic Research, Inc.
    2. 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.
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    10. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics,in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
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    12. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
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    More about this item

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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