Which Model to Match?

44 Pages Posted: 17 Jan 2012 Last revised: 18 Oct 2015

See all articles by Matteo Barigozzi

Matteo Barigozzi

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); London School of Economics and Political Science; University of Bologna

Roxana Halbleib

University of Konstanz

David Veredas

Vlerick Business School

Date Written: October 11, 2015

Abstract

The asymptotic efficiency of indirect estimation methods, such as Indirect Inference and the Efficient Method of Moments, depends on the choice of the auxiliary model, which is some- how ad hoc and based on an educated guess. We introduce a consistent simulation based Akaike-type class of information criteria that helps the user in this choice among nested and non-nested auxiliary models by selecting the model that provides the best trade-off between efficiency and estimation error. We prove consistency of the proposed criterion as the sample sizes of the observed and simulated data increase. In a Monte Carlo exercise and an empirical illustration we show the usefulness of the method.

Keywords: Auxiliary model, efficient method of moments, indirect inference, information criteria

JEL Classification: C13, C52

Suggested Citation

Barigozzi, Matteo and Barigozzi, Matteo and Barigozzi, Matteo and Halbleib, Roxana and Veredas, David, Which Model to Match? (October 11, 2015). Available at SSRN: https://ssrn.com/abstract=1986419 or http://dx.doi.org/10.2139/ssrn.1986419

Matteo Barigozzi

London School of Economics and Political Science ( email )

Houghton Street
London, England WC2A 2AE
United Kingdom

University of Bologna ( email )

Piazza Scaravilli 2
Bologna, 40100
Italy

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium

HOME PAGE: http://www.barigozzi.eu/research.html

Roxana Halbleib

University of Konstanz ( email )

Universitaetsstr. 10
Box: D 124
78457 Konstanz
Germany

HOME PAGE: http://econometrics.wiwi.uni-konstanz.de/staff/halbleib.htm

David Veredas (Contact Author)

Vlerick Business School ( email )

Library
REEP 1
Gent, BE-9000
Belgium