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DETECTING LACK OF IDENTIFICATION IN GMM

Published online by Cambridge University Press:  31 January 2003

Jonathan H. Wright
Jonathan H. Wright
Affiliation:
Federal Reserve Board
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Abstract

This paper proposes a test of the null of underidentification in the nonlinear-in-parameters generalized method of moments model. It can be thought of as a nonlinear analog of the usual linear instrumental variables first-stage F-test. It can be used as a diagnostic to warn a researcher when conventional asymptotic theory is unlikely to work well.I am grateful to Don Andrews, Jon Faust, John Fernald, Jim Stock, and two anonymous referees for their helpful comments on earlier drafts of this manuscript. I am also grateful to George Tauchen for providing me with the code for generating artificial asset price data. All errors are my sole responsibility.

Type
Research Article
Information
Econometric Theory , Volume 19 , Issue 2 , April 2003 , pp. 322 - 330
Copyright
© 2003 Cambridge University Press

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References

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