GMM estimation with noncausal instruments under rational expectations

Matthijs Lof

MPRA Paper from University Library of Munich, Germany

Abstract: There is hope for the generalized method of moments (GMM). Lanne and Saikkonen (2011) show that the GMM estimator is inconsistent, when the instruments are lags of noncausal variables. This paper argues that this inconsistency depends on distributional assumptions, that do not always hold. In particular under rational expectations, the GMM estimator is found to be consistent. This result is derived in a linear context and illustrated by simulation of a nonlinear asset pricing model.

Keywords: generalized method of moments; noncausal autoregression; rational expectations (search for similar items in EconPapers)
JEL-codes: C22 C32 C51 (search for similar items in EconPapers)
Date: 2011-12-22
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: GMM Estimation with Non-causal Instruments under Rational Expectations (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:35536

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