RELIABLE INFERENCE FOR GMM ESTIMATORS? FINITE SAMPLE PROPERTIES OF ALTERNATIVE TEST PROCEDURES IN LINEAR PANEL DATA MODELS
Stephen Bond and
Frank Windmeijer ()
Econometric Reviews, 2005, vol. 24, issue 1, 1-37
We compare the finite sample performance of a range of tests of linear restrictions for linear panel data models estimated using the generalized method of moments (GMM). These include standard asymptotic Wald tests based on one-step and two-step GMM estimators; two bootstrapped versions of these Wald tests; a version of the two-step Wald test that uses a finite sample corrected estimate of the variance of the two-step GMM estimator; the LM test; and three criterion-based tests that have recently been proposed. We consider both the AR(1) panel model and a design with predetermined regressors. The corrected two-step Wald test performs similarly to the standard one-step Wald test, whilst the bootstrapped one-step Wald test, the LM test, and a simple criterion-difference test can provide more reliable finite sample inference in some cases.
Keywords: Finite sample inference; Generalized method of moments; Hypothesis testing (search for similar items in EconPapers)
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