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Underidentification?

Author

Listed:
  • Manuel Arellano

    (Institute for Fiscal Studies and Centre for Monetary and Financial Studies (CEMFI))

  • Lars Peter Hansen

    (Institute for Fiscal Studies)

  • Enrique Sentana

    (Institute for Fiscal Studies and CEMFI)

Abstract

We develop methods for testing the hypothesis that an econometric model is underidentified and inferring the nature of the failed identification. By adopting a generalized-method-of moments perspective, we feature directly the structural relations and we allow for nonlinearity in the econometric specification. We establish the link between a test for overidentification and our proposed test for underidentification. If, after attempting to replicate the structural relation, we find substantial evidence against the overidentifying restrictions of an augmented model, this is evidence against underidentification of the original model.

Suggested Citation

  • Manuel Arellano & Lars Peter Hansen & Enrique Sentana, 2009. "Underidentification?," CeMMAP working papers CWP24/09, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:cemmap:24/09
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    File URL: http://cemmap.ifs.org.uk/wps/cwp2409.pdf
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    Cited by:

    1. Catherine Doz & Eric Renault, 2004. "Conditionaly Heteroskedastic Factor Models : Identificationand Instrumental variables Estmation," Thema Working Papers 2004-13, THEMA (Théorie Economique, Modélisation et Applications), CY Cergy-Paris University, ESSEC and CNRS.
    2. Manuel Arellano & Lars Peter Hansen & Enrique Sentana, 2009. "Underidentification? (Resumen)," Working Papers wp2009_0905, CEMFI.
    3. Bingley, P. & Eriksson, T, 2001. "Pay Spread and Skewness. Employee Effort and Firm Productivity," Papers 01-2, Aarhus School of Business - Department of Economics.
    4. M. Dolores Collado & Martin Browning, 2007. "Habits and heterogeneity in demands: a panel data analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(3), pages 625-640.
    5. Mette Lunde Christensen, 2002. "Heterogeneity in consumer demands and the income effect: evidence from panel data," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C4-1, International Conferences on Panel Data.
    6. Prosper Dovonon & Alastair R. Hall, 2017. "The Asymptotic Properties of GMM and Indirect Inference Under Second-Order Identification," Economics Discussion Paper Series 1705, Economics, The University of Manchester.
    7. Markus Fritsch & Andrew Adrian Pua & Joachim Schnurbus, 2019. "Revisiting Evidence on Habits and Heterogeneity in Demands," Working Papers 2019-07-09, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
    8. Pierlauro Lopez, 2018. "A New Keynesian Q Theory and the Link Between Inflation and the Stock Market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 29, pages 85-105, July.
    9. Fritsch, Markus & Pua, Andrew Adrian Yu & Schnurbus, Joachim, 2019. "Revisiting habits and heterogeneity in demands," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-78-19, University of Passau, Faculty of Business and Economics.
    10. Jason G. Cummins & Kevin A. Hassett & Stephen D. Oliner, 2013. "Investment Behavior, Observable Expectations, and Internal Funds: Corrigendum," American Economic Review, American Economic Association, vol. 103(4), pages 1538-1539, June.
    11. Lynda Khalaf & Maral Kichian, 2003. "Testing the Stability of the Canadian Phillips Curve Using Exact Methods," Staff Working Papers 03-7, Bank of Canada.

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