Abstract
A seminal work by Domínguez and Lobato (2004) proposed a consistent estimation method for conditional moment restrictions, which does not rely on additional identification assumptions as in the GMM estimator using unconditional moments and is free from any user-chosen number. Their methodology is further extended by Domínguez and Lobato (2015, 2020) for consistent specification testing of conditional moment restrictions, which may involve generated variables. We follow up this literature and derive the asymptotic distribution of Domínguez and Lobato's (2004) estimator that involves generated variables. Our simulation result illustrates that ignoring proxy errors in the generated variables may cause severer distortions for the coverage or size properties of statistical inference on parameters.
Original language | English |
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Article number | 110454 |
Journal | Economics Letters |
Volume | 215 |
DOIs | |
Publication status | Published - 2022 Jun |
Keywords
- Conditional moment restriction
- Generated variable
- GMM
ASJC Scopus subject areas
- Finance
- Economics and Econometrics