The optimal choice of moments in dynamic panel data models

Ryo Okui

Journal of Econometrics, 2009, vol. 151, issue 1, pages 1-16

Abstract: This paper derives an approximation of the mean square error (MSE) of the GMM estimator in dynamic panel data models. The approximation is based on higher-order asymptotic theory under double asymptotics. While first-order theory under double asymptotics provides information about the bias, it does not provide enough information about the variance of the estimator. Higher-order theory enables us to obtain information about the variance. From this result, a procedure for choosing the number of instruments is proposed. The simulations confirm that the proposed procedure improves the precision of the estimator.

Keywords: GMM; Dynamic; panel; data; model; Higher-order; expansion; Moment; selection (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:eee:econom:v:151:y:2009:i:1:p:1-16

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