Model Selection Tests for Conditional Moment Inequality Models

Yu-Chin Hsu and Xiaoxia Shi

No 13-A004, IEAS Working Paper : academic research from Institute of Economics, Academia Sinica, Taipei, Taiwan

Abstract: In this paper, we propose a Vuong (1989)-type model selection test for conditional moment inequality models. The test uses a new average generalized empirical likelihood (AGEL) criterion function designed to incorporate full restriction of the conditional model. We also introduce a new adjustment to the test statistic making it asymptotically pivotal whether the candidate models are nested or nonnested. The test uses simple standard normal critical value and is shown to be asymptotically similar, to be consistent against all fixed alternatives and to have nontrivial power against n-1/2-local alternatives. Monte Carlo simulations demonstrate that the finite sample performance of the test is in accordance with the theoretical prediction.

Keywords: Asymptotic size; Model selection test; Conditional moment inequalities; Partial identi- cation; Generalized empirical likelihood (search for similar items in EconPapers)
JEL-codes: C12 C52 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2013-05
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (4)

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