Estimating forward looking Euler equations with GMM estimators: an optimal instruments approach

Jeffrey Fuhrer and Giovanni Olivei

No 04-2, Working Papers from Federal Reserve Bank of Boston

Abstract: This paper compares different methods for estimating forward-looking output and inflation Euler equations and shows that weak identification can be an issue in conventional GMM estimation. The authors propose a GMM procedure that imposes the dynamic constraints implied by the forward-looking relation on the instruments set. This ?optimal instruments? procedure is more reliable than conventional GMM, and it provides a robust alternative to estimating dynamic macroeconomic relations. Empirical applications of this procedure suggest only a limited role for expectational terms.

Keywords: Keynesian economics; Macroeconomics (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://www.bostonfed.org/economic/wp/wp2004/wp042.htm (text/html)
http://www.bostonfed.org/economic/wp/wp2004/wp042.pdf (application/pdf)

Related works:
Journal Article: Estimating forward-looking Euler equations with GMM estimators: an optimal-instruments approach (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedbwp:04-2

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Boston Contact information at EDIRC.
Bibliographic data for series maintained by Catherine Spozio ().