Which Moments to Match?

33 Pages Posted: 13 Mar 1998

See all articles by A. Ronald Gallant

A. Ronald Gallant

Duke University - Fuqua School of Business, Economics Group; New York University - Department of Economics

George Tauchen

Duke University - Economics Group

Date Written: September 1995

Abstract

We describe an intuitive, simple, and systematic approach to generating moment conditions for GMM estimation of the parameters of a structural model. The idea is to use the score of a density that has an analytic expression to define the GMM criterion. The auxiliary model that generates the score should closely approximate the distribution of the observed data but is not required to nest it. If the auxiliary model nests the structural model then the estimator is as efficient as maximum likelihood. The estimator is advantageous when expectations under a structural model can be computed by simulation, by quadrature, or by analytic expressions but the likelihood cannot be computed easily.

JEL Classification: C49, C51

Suggested Citation

Gallant, A. Ronald and Tauchen, George E., Which Moments to Match? (September 1995). Available at SSRN: https://ssrn.com/abstract=37760 or http://dx.doi.org/10.2139/ssrn.37760

A. Ronald Gallant (Contact Author)

Duke University - Fuqua School of Business, Economics Group ( email )

Box 90097
Durham, NC 27708-0097
United States

New York University - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States

George E. Tauchen

Duke University - Economics Group ( email )

Box 90097
221 Social Sciences
Durham, NC 27708-0097
United States
919-660-1812 (Phone)
919-684-8974 (Fax)

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