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Efficiency comparisons for a system GMM estimator in dynamic panel data models

  • Frank Windmeijer

    ()

    (Institute for Fiscal Studies and University of Bristol)

The system GMM estimator in dynamic panel data models combines moment conditions for hte differenced equation with moment conditions for the model in levels. An initial optimal weight matrix under homoscedasticity and non-serial correlation is not known for this estimation procedure. It is common practice to use the inverse of the moment matrix of the instruments as the initial weight matrix. This paper assesses the potential efficiency loss from the use of this weight matrix using the efficiency bounds as derived by Liu and Neudecker (1997).

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File URL: http://www.ifs.org.uk/wps/wp9801.pdf
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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W98/01.

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Length: 12 pp.
Date of creation: Oct 1998
Date of revision:
Handle: RePEc:ifs:ifsewp:98/01
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  1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  2. 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.
  3. Ahn, Seung C. & Schmidt, Peter, 1995. "Efficient estimation of models for dynamic panel data," Journal of Econometrics, Elsevier, vol. 68(1), pages 5-27, July.
  4. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
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