The Asymptotic Properties of the System GMM Estimator in Dynamic Panel Data Models When Both N and T are Large

Kazuhiko Hayakawa

Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: This paper complements Alvarez and Arellano (2003) by showing the asymptotic properties of the system GMM estimator for AR(1) panel data models when both N and T tend to infinity. We show that the system GMM estimator with the instruments which Blundell and Bond (1998) used will be inconsistent when both N and T are large. We also show that the system GMM estimator with all available instruments, including redundant ones, will be consistent if σ η 2 /σ v 2 = 1-α holds.

Date: 2006-01
New Economics Papers: this item is included in nep-ecm and nep-ets
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