Testing a Parametric Function Against a Nonparametric Alternative in IV and GMM Settings
CREATES Research Paper 2009-54
36 Pages Posted: 20 Nov 2009
Date Written: November 19, 2009
This paper develops a specification test for functional form for models identified by moment restrictions, including IV and GMM settings. The general framework is one where the moment restrictions are specified as functions of data, a finite-dimensional parameter vector, and a nonparametric real function (an infinite-dimensional parameter vector). The null hypothesis is that the real function is parametric. The test is relatively easy to implement and its asymptotic distribution is known. The test performs well in simulation experiments.
Keywords: generalized method of moments, specification test, nonparametric alternative, LM statistic, generalized arc-sine distribution
JEL Classification: C12, C14, C52
Suggested Citation: Suggested Citation