Testing the Null of Identification in GMM
Jonathan H. Wright
Board of Governors of the Federal Reserve System - Trade and Financial Studies Section
FRB International Finance Discussion Paper No. 732
This paper proposes a new test of the null hypothesis that a generalized method of moments model is identified. The test can detect local or global underidentification, and underidentification in some or all directions. The idea of the test is to compare the volume of two confidence sets - one that is robust to lack of identification and one that is not. Under the null hypothesis the relative volume of these two sets is Op(1), but under the alternative, the robust confidence set has infinite relative volume.
Number of Pages in PDF File: 43
Keywords: Identification, Robust Confidence Sets, Weak Instruments, Generalized Method of Moments
JEL Classification: C12, C20, C30working papers series
Date posted: October 4, 2002
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