Arbeitspapier

Efficiency Gains by Modifying GMM Estimation in Linear Models under Heteroskedasticity

While coping with nonsphericality of the disturbances, standard GMM suffers from a blind spot for exploiting the most effective instruments when these are obtained directly from unconditional rather than conditional moment assumptions. For instance, standard GMM counteracts that exogenous regressors are used as their own optimal instruments. This is easily seen after transmuting GMM for linear models into IV in terms of transformed variables. It is demonstrated that modified GMM (MGMM), exploiting straight-forward modifications of the instruments, can achieve substantial efficiency gains and bias reductions, even under mild heteroskedasticity. Feasible MGMM implementations and their standard er-ror estimates are examined and compared with standard GMM and IV for a range of typical models for cross-section data, both by simulation and by empirical illustration.

Sprache
Englisch

Erschienen in
Series: CESifo Working Paper ; No. 5088

Klassifikation
Wirtschaft
Econometrics
Estimation: General
Single Equation Models: Single Variables: Instrumental Variables (IV) Estimation
Thema
efficiency
generalized method of moments
instrument strength
non-spherical disturbances
(un)conditional moment assumptions

Ereignis
Geistige Schöpfung
(wer)
Kiviet, Jan Frederik
Feng, Qu
Ereignis
Veröffentlichung
(wer)
Center for Economic Studies and ifo Institute (CESifo)
(wo)
Munich
(wann)
2014

Handle
Letzte Aktualisierung
10.03.2025, 11:45 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Kiviet, Jan Frederik
  • Feng, Qu
  • Center for Economic Studies and ifo Institute (CESifo)

Entstanden

  • 2014

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