RELIABLE INFERENCE FOR GMM ESTIMATORS? FINITE SAMPLE PROPERTIES OF ALTERNATIVE TEST PROCEDURES IN LINEAR PANEL DATA MODELS
- 9 March 2005
- journal article
- Published by Taylor & Francis Ltd in Econometric Reviews
- Vol. 24 (1), 1-37
- https://doi.org/10.1081/etc-200049126
Abstract
We compare the finite sample performance of a range of tests of linear restrictions for linear panel data models estimated using the generalized 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 finite sample corrected estimate of the variance of the two-step GMM estimator; the LM test; and three criterion-based 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.Finite sample inference, Generalized method of moments, Hypothesis testing,Keywords
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