Corrected standard errors for optimal minimum distance estimator

Kazuhiko Hayakawa

Economics Letters, 2018, vol. 167, issue C, 5-9

Abstract: This paper compares three types of standard errors for optimal minimum distance (OMD) estimator where the structural parameter is recovered from the reduced form parameters estimated by a two-step GMM estimator. We demonstrate that the naive standard errors are severely biased and cause over-rejection, while the OMD estimator based on the bias-corrected variance matrix by Windmeijer (2005) and newly derived variance estimator yield much more accurate inference.

Keywords: Standard error; Minimum distance estimator; Panel data model; Serial correlation; Interactive fixed effects (search for similar items in EconPapers)
JEL-codes: C12 C13 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:167:y:2018:i:c:p:5-9

DOI: 10.1016/j.econlet.2018.02.029

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