Testing the Null of Identification in GMM

Wright, Jonathan

doi:10.2139/ssrn.321440

Abstract

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Testing the Null of Identification in GMM

Jonathan H. Wright

Board of Governors of the Federal Reserve System - Trade and Financial Studies Section

July 2002

FRB International Finance Discussion Paper No. 732

Abstract:
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, C30

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Date posted: October 4, 2002

Suggested Citation

Wright, Jonathan H., Testing the Null of Identification in GMM (July 2002). FRB International Finance Discussion Paper No. 732. Available at SSRN: http://ssrn.com/abstract=321440 or http://dx.doi.org/10.2139/ssrn.321440

Contact Information

Jonathan H. Wright (Contact Author)

Board of Governors of the Federal Reserve System - Trade and Financial Studies Section ( email )

20th St. and Constitution Ave.
Washington, DC 20551
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202-453-3696 (Phone)
202-263-4843 (Fax)