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Abstract

There is hope for the generalized method of moments GMM. Lanne and Saikkonen 2011 show that the GMM estimator is inconsistent, when the instruments are lags of noncausal variables. This paper argues that this inconsistency depends on distributional assumptions, that do not always hold. In particular under rational expectations, the GMM estimator is found to be consistent. This result is derived in a linear context and illustrated by simulation of a nonlinear asset pricing model.



Item Type: MPRA Paper -

Original Title: GMM estimation with noncausal instruments under rational expectations-

Language: English-

Keywords: generalized method of moments, noncausal autoregression, rational expectations-

Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and EstimationC - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space ModelsC - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes-





Author: Lof, Matthijs

Source: https://mpra.ub.uni-muenchen.de/35536/







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