Small-Sample Properties of GMM-Based Wald Tests

Craig Burnside and Martin Eichenbaum

Journal of Business & Economic Statistics, 1996, vol. 14, issue 3, 294-308

Abstract: This paper assesses the small sample properties of generalized method of moments based Wald statistics by using a vector white noise process and an equilibrium business cycle model as the data generating mechanisms. In many cases, the small sample size of the Wald tests exceeds its asymptotic size, and increases sharply with the number of hypotheses being jointly tested. The authors argue that this is mostly due to difficulty in estimating the spectral density matrix of the residuals. Estimators of this matrix that impose restrictions implied by the model or the null hypothesis substantially improve the properties of the Wald statistics.

Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:14:y:1996:i:3:p:294-308

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