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# Large Sample Properties Generalized Method of Moments Estimators

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## Abstract

This paper studies estimators that make sample analogues of population orthogonality conditions close to zero. Strong consistency and asymptotic normality of such estimators is established under the assumption that the observable variables are stationary and ergodic. Since many linear and nonlinear econometric estimators reside within the class of estimators studied in this paper, a convenient summary of the large sample properties of these estimators, including some whose large sample properties have not heretofore been discussed, is provided.

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... For example in the case of an upcoming press release, press-release induced order flow may cause an immediate quote update and portfolio rebalancing (Vayanos, 2001). Hansen (1982) introduced the two-step generalized method of moments (GMM) to applied economics and finance, where it provides a generic method for estimating finite-dimensional parameters in semi-parametric models. GMM starts by positing a centralized moment condition, a system of q × 1 potentially nonlinear equations E[g( 0 , x i )] = 0 used to estimate parameters 0 ∈ ℜ p . ...
... Generalized method of moments (Hansen, 1982) estimation was applied to an ELOB model restricted to the four best quotes on both sides yielding 13 moment conditions: 4 break-even (5), 8 updating (6), and 1 market order size (7). Time ticks represent the arrival of a market order, and the ELOB state is shown just ahead of the next market order arrival. ...
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This research identified predictors of cryptocurrency liquidity and explored whether cryptocurrency is a true cash equivalent. Liquidity is important because cryptocurrencies aim to be cash substitutes, and thus totally liquid. Greater liquidity is correlated with more profitable trading, better price discovery; and more profitable market operation. The research tested five hypotheses concerning liquidity and its predictors, for a set of cryptocurrencies that represent ~ 90% of volume and market capitalization, thus are generalizable. Price was strongly supported as a predictor of liquidity, while volume was not. Fungibility, in the sense of ‘mutual interchangeability of particular pairs of cryptocurrencies, was not found to be a good predictor of liquidity, leading us to question whether cryptocurrencies can truly be considered ’cash equivalents’. I also tested whether price and volume embedded in own-price elasticity was a predictor of liquidity, and rejected this hypotheses. Finally, an analysis involving step-wise regression unambiguously selected a combination (3) daily volume, and (4) own-price elasticity. Explanatory power was somewhat better than other predictors, allowing future research to incorporate these findings to construct better models of liquidity in blockchain-enabled markets.
... Example 2: Nonlinear IV and GMM. Amemiya (1977), Hansen (1982), Hansen et al. (1996) introduced nonlinear IV and GMM estimators that maximize ...
... 2. The smooth nonlinear stationary and dynamic GMM and Quasi-likelihood models of Hansen (1982), Gallant and White (1988) and Pötscher and Prucha (1997), covering Gordin(mixingale type) conditions and near-epoch dependent processes such as ARMA, GARCH, ARCH, and other models alike; ...
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This paper studies computationally and theoretically attractive estimators called the Laplace type estimators (LTE), which include means and quantiles of Quasi-posterior distributions defined as transformations of general (non-likelihood-based) statistical criterion functions, such as those in GMM, nonlinear IV, empirical likelihood, and minimum distance methods. The approach generates an alternative to classical extremum estimation and also falls outside the parametric Bayesian approach. For example, it offers a new attractive estimation method for such important semi-parametric problems as censored and instrumental quantile, nonlinear GMM and value-at-risk models. The LTE's are computed using Markov Chain Monte Carlo methods, which help circumvent the computational curse of dimensionality. A large sample theory is obtained for regular cases.
... Two tests were used to test the validity of SGMM and DGMM estimated coefficients in the models, and these include the Sargan/Hansen J tests and the Arellano and Bond Autoregressive (AR 2) test. Results presented in Table 4-5 indicates that the Hansen's (1982) J tests values are insignificant which suggests the validity of over identifying restrictions, confirming that the employed sets of instruments in the regression model are not endogenous, and the values of the Arellano-Bond (1991) tests which examines whether error terms have correlation do not reject the absence of second order serial correlation in all estimated models. Aggregate of the home country economics risk (E), financial risk (F) and political (P) risk data shown in Table A1-A3 computed as 0.5( + + ) is used as proxy for home country composite risk (ICRG, 2017). ...
... This implies that the error structures of the model are serially uncorrelated, suggesting that the results are valid, and the model's specifications derived in section 4.2 are appropriate. Beside the AR (2) test, the values of Hansen's (1982) J tests are insignificant, indicating that the over identifying restrictions are valid and the specification instruments are valid. The proliferation of instrument which can weaken both autocorrelation and Hansen tests specification, remain one major drawback in GMM estimator. ...
Article
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Socially responsible mutual funds (SRMF) and the "antisocially conscious", Vitium Global Fund Barrier Fund (formerly known as the Vice Fund, the term used in this paper) returns, volatility patterns, and causal effects are examined in this study within the context of the lessons learned from the 2008 Global Economic and Financial Crisis (GEFC). In times of a new and unprecedented crisis due to the COVID-19 pandemic, a look back to our recent past reveals that volatility patterns on daily stock returns presented some level of predictability on prices for both types of funds. The research findings are significant as funds' potential predictability could help market players when designing their investment strategies. More specifically, an increase in volatility persistence is found after the GEFC, together with an increase in the Vice Fund's resilience to market shocks. Although all funds, without substantial differences, take time to absorb the shocks. A noteworthy outcome relates to SRMF that was able to achieve higher returns and exhibited lower volatility levels during the crisis period. Whereas the Vice Fund revealed long-run sustainable performance offering fund managers and investors investment opportunities that are endorsed by the fund performance over the period. Furthermore, unidirectional causality was found running from the Vice Fund to the SRMF, exhibiting a clear dominance during the GEFC period. The research findings contribute to the debate on the future of socially responsible investment, indicating that SRMF appears to be driven by "antisocially conscious" funds signaling limited rewards for investors inclined to invest in funds that are considered socially responsible.
... Genelleştirilmiş Momentler Metoduna Hansen (1982) daha önce diğer araştırmacılarca çalışılmamış koşullar altında tahmin edicilerin tutarlılığı ile asimptotik normalliği hakkında bir tartışma sağlamasıyla katkıda bulunmuştur. (Hansen, 1982(Hansen, , s. 1050. ...
... Genelleştirilmiş Momentler Metoduna Hansen (1982) daha önce diğer araştırmacılarca çalışılmamış koşullar altında tahmin edicilerin tutarlılığı ile asimptotik normalliği hakkında bir tartışma sağlamasıyla katkıda bulunmuştur. (Hansen, 1982(Hansen, , s. 1050. Bu yöntemin avantajı güçlü dağılım varsayımlarına gerek olmadan modeli ve tahmin edicileri formüle edebilmesidir. ...
... Based on the Akaike information criterion, we use three lags of the variables in our VAR model. At three lags, Hansen's (1982) J statistic also becomes insignificant (i.e., error terms are uncorrelated with additional lags), giving us further confidence that our model is set properly. Finally, we construct an impulse response function (IRF) graph using the VAR estimates that will allow us to examine the influence of lockdowns on bond spreads and the persistence of this influence through time. ...
... The underlying vector autoregression regression dynamically models Average Spread , ln(1 + New Cases in the State ), ln(1 + Vaccination in the State ), and Shutdown variables. Based on the Akaike information criterion and Hansen's (1982) J statistic, we use three lags of the variables to estimate this model. Shutdown is a dummy variable that indicates if a state is shut down in a week. ...
Article
We study how investors in the US municipal bond market price the state lockdowns announced during the coronavirus (COVID) pandemic. To begin with, we examine the extent to which state-level COVID developments influence yield spreads of municipal bonds. We find that macro-level factors are the primary determinants of municipal bond spreads during the pandemic, but state-level COVID developments also matter at the margin. For instance, a doubling of new COVID cases in a state is associated with a 2% (1.4 basis points) increase in yield spreads of municipal bonds issued in that state. Accordingly, lockdowns may decrease municipal bond spreads by reducing COVID cases, but lockdowns may also increase them by reducing local economic activities. Overall, we find that yield spreads in both primary and secondary municipal bond markets increase by about 15% following lockdown announcements, suggesting that lockdown announcements increase the risk premiums investors require for holding municipal bonds.
... La robustesse des résultats issus de l'estimateur des moments dépend de la qualité des instruments retenus. Les instruments ont été appréciés à l'aide d'un test de la statistique J de Hansen (1982) qui évalue la nullité de la covariance entre la liste des instruments et le terme d'erreur. D'après le résultat de ce test présenté au tableau 1.4, les conditions d'orthogonalité sont validées au seuil de 5%. ...
... Différents estimateurs MMG peuvent être obtenus selon le choix de la matrice A lorsqu'il y a des restrictions de sur-identification. Hansen (1982) montre alors qu'on peut obtenir des estimateurs MMG efficaces, étant donné les variables instrumentales, en choisissant pour cette matrice l'inverse de la matrice de variance covariance des moments de l'échantillon. En effet, l'équation (2) représente la statistique J qui est la valeur minimum de la fonction objective. ...
Thesis
La présente thèse dont l’opportunité pourrait être bien saisie à travers les difficultés des pays de la CEMAC à soutenir de manière stable l’activité, propose une analyse de l’efficacité de la politique monétaire de la BEAC à partir d’une investigation mettant en selle le niveau de congruence de certains éléments essentiels à cette politique, avec les caractéristiques économiques des pays de la zone. Dans le premier chapitre, nous discutons de la pertinence de l’objectif d’inflation de la BEAC, et montrons à partir d’une courbe de Phillips hybride, puis à l’aide d’un modèle non linéaire à transition lisse, que l’objectif actuel de 3%, nettement inférieur à l’objectif empiriquement évalué à 4,53%, limite sa capacité à lisser la conjoncture. Dans le deuxième chapitre, nous poursuivons l’analyse en nous interrogeant sur la capacité des autorités à tirer parti du supplément d’efficacité qu’offrirait une cible proche de 4,53%. L’évaluation du mécanisme de transmission montre que la forte immunité du système bancaire aux chocs monétaires compromet significativement l’efficacité de la politique monétaire. Le relèvement de la cible d’inflation ne produirait donc les effets attendus qu’en présence d’un système bancaire moins résilient aux innovations de politique monétaire. Le troisième chapitre qui se situe dans le prolongement des deux premiers, est consacré à l’identification de la règle de politique monétaire la plus apte à stabiliser le système économique des pays de la CEMAC. L’investigation économétrique effectuée à l’aide d’un modèle dynamique avec anticipations rationnelles permet de conclure à la supériorité des règles de masse monétaire sur les règles de taux d’intérêt, et de légitimer l’ancrage monétaire de la BEAC, adopté à la faveur des réformes introduites à la fin des années 1980.
... However, to ensure the validity of our estimates, we conducted Arellano-Bond test for error serial correlation at the second order, AR (2), following Arellano and Bond (1991). We also conducted the Hansen (1982) test for over-identifying restrictions, which is preferred to the Sargan test because it is consistent in the presence of autocorrelation. Furthermore, regional investigations were conducted in this study using the quantile regression approach in Eq. (2). ...
... The results from these robustness estimations are reported in Appendices Tables 5, 6, 7, 8, 9 and 10. All the models in Table 3 and Appendices Tables 5, 6, 7, 8, 9 and 10 we subjected to Arellano-Bond tests for error serial correlation and Hansen (1982) tests for over-identifying restrictions. The results indicate the absence of autocorrelation problem as well as the presence of valid over-identifying restrictions in all cases. ...
Article
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In recent years, the global economy has witnessed several uncertainty-inducing events. However, empirical evidence in Africa on the effects of economic policy uncertainty (EPU) on economic activities remains scanty. Besides, the moderating effect of governance institutions on the uncertainty-economic performance relationship in Africa and the likelihood of regional differences in the response of economic activities to EPU on the continent are yet to be investigated. To address these gaps, we applied system GMM and quantile regressions on a panel of forty-seven African countries from 2010 to 2019. We find that while global EPU and EPUs from China, USA and Canada exert considerable influence on economic performance in Africa, the effects of domestic EPU and EPUs from Europe, UK, Japan, and Russia were negligible, suggesting that African economies are resilient to these sources of uncertainty shocks. We also find that governance institutions in Africa are not significantly moderating the uncertainty-economic performance relationship. However, our results highlighted regional differences in the response of economic activities to uncertainty, such that when compared to East and West Africa, economic performance in Central, North and Southern Africa is generally more resilient to global EPU and EPUs from China, USA, Europe and UK. We highlighted the policy implications of these findings.
... In essence, the present study adopts the two-step System-GMM technique in accordance with Roodma [70] and Windmeijer [72]. Further, the efficiency and persistent nature of this estimator are usually subjected to Arellano and Bond's [73] AR(1) and AR(2) tests of the serial correlation properties and Hansen's [74] J-test of overidentifying restrictions. ...
Article
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This study examines the impactful role played by trade facilitation (TF) in promoting or hindering food security in a panel of 34 sub-Saharan countries for the period 2005–2019. The empirical evidence is based on the Two-Step Dynamic System Generalized Method of Moments estimator, employed to account for econometric concerns bothering on unobserved heterogeneity and potential endogeneity inherent in the variables used. The empirical findings show that the nature of TF procedures, which are inefficient, negatively impact food security in SSA. These effects are evident on the availability and accessibility dimensions of food security as well as their composite index. While it is noted that this result runs counter to the established a priori of positive signs on the one hand, it however portrays the reality of the economic phenomenon in SSA on the other / hand. In balance, the present TF regime can best be described as anti-food security as suggested by the prevailing burdensome procedures involved in exporting and importing staple food items. The functional roles of population growth and institutional quality are empirically enhanced divergently. Going forward, we recommend that for food sufficiency and Sustainable Development Goals to be achieved quickly, governments within the region would need to finetune the underlying modalities of the present TF regime
... The validity of instruments is tested by the Hansen J-test (Hansen 1982), controlling the orthogonality of all instruments, and by the Arellano-Bond test of autocorrelation [AR(2)], controlling the validity of lagged instruments (Arellano and Bond 1991). ...
... We applied the GMM approach because the ordinary least squares (OLS) regression methodology does not address the problem of endogeneity that occurs when the independent variables are correlated with the error term. To address this problem and obtain reliable estimates, we use the Generalized Method of Moments (GMM) introduced by Hansen (1982). The GMM model also controls for autocorrelation and heteroskedasticity of unknown form (Musa et al, 2021). ...
Article
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We investigate the effect of abnormal increase in credit supply on economic growth in Nigeria after controlling for the quality of the legal system, size of central bank asset, banking sector cost efficiency and bank insolvency risk. The abnormal increase in credit supply has a significant effect on economic growth. The abnormal increase in credit supply increases real GDP growth. The abnormal increase in credit supply decreases real GDP per capita during the global financial crisis. The abnormal increase in domestic credit to private sector has a significant positive effect on GDP per capita when there is strong legal system quality in Nigeria. In contrast, the abnormal increase in domestic credit to private sector has a significant negative effect on real GDP growth when there isstrong legal system quality in Nigeria. The abnormal increase in credit supply is ineffective in increasing GDP per capita during crisis years. Policymakers should be cautious in pressuring financial institutions to release an abnormally large amount of credit into the economy particularly during financial crises. Rather, policymakers should encourage financial institutions to supply credit in a sustained manner – not in an abnormal manner – and in a way that supports growth.
... Further, another issue can arise in panel data analysis: heteroscedasticity. Therefore, to avoid endogeneity and heteroscedasticity problems, we used the GMM model developed by Hansen (1982) to estimate equations. ...
Research
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This paper revisits the corporate governance role in persuading non-financial firms' investment pronouncements listed on the Pakistan Stock Exchange (PSX). Since Pakistan Corporate Governance Code was revised in 2012, the impact of change due to the revision of the code is also analyzed. The results of the study provide interesting insights. We found that the corporate governance code 2012 diminishes investment inefficiency. The family-owned businesses have an incentives alignment effect by decreasing inefficient investments. However, post-code period results show that stringent monitoring mechanisms of code decrease the family managers' initiatives to undertake projects. The resource provisioning function of the independent board in decreasing inefficient investment is identified when combined with improved governance code standards. Independent directors of the audit committee diminish inefficient investments. However, the supervision effect of independent audit committee directors is eliminated in the post-code 2012 period. Asset side accruals quality reduces investment inefficiency. However, against our expectations, liability side accruals quality increases investment inefficiency. We further observed that the corporate governance code 2012 incrementally linked with accrual quality and investment inefficiency.
... Based on this observation, we can check the validity of moment conditions in (16)-(17) to examine the adequacy of the log-SHE model. This testing idea is the same as that of the overidentification test in Sargan (1958) and Hansen (1982); see also Lee (2007), Sun and Kim (2012), Dovonon and Gonçalves (2017), and Jin and Lee (2019) for more studies in this aspect. ...
Preprint
The spatial dependence in mean has been well studied by plenty of models in a large strand of literature, however, the investigation of spatial dependence in variance is lagging significantly behind. The existing models for the spatial dependence in variance are scarce, with neither probabilistic structure nor statistical inference procedure being explored. To circumvent this deficiency, this paper proposes a new generalized logarithmic spatial heteroscedasticity model with exogenous variables (denoted by the log-SHE model) to study the spatial dependence in variance. For the log-SHE model, its spatial near-epoch dependence (NED) property is investigated, and a systematic statistical inference procedure is provided, including the maximum likelihood and generalized method of moments estimators, the Wald, Lagrange multiplier and likelihood-ratio-type D tests for model parameter constraints, and the overidentification test for the model diagnostic checking. Using the tool of spatial NED, the asymptotics of all proposed estimators and tests are established under regular conditions. The usefulness of the proposed methodology is illustrated by simulation results and a real data example on the house selling price.
... Based on this observation, we can check the validity of moment conditions in (16)-(17) to examine the adequacy of the log-SHE model. This testing idea is the same as that of the overidentification test in Sargan (1958) and Hansen (1982); see also Lee (2007), Sun and Kim (2012), Dovonon and Gonçalves (2017), and Jin and Lee (2019) for more studies in this aspect. ...
Article
Full-text available
The spatial dependence in mean has been well studied by plenty of models in a large strand of literature, however, the investigation of spatial dependence in variance is lagging significantly behind. The existing models for the spatial dependence in variance are scarce, with neither probabilistic structure nor statistical inference procedure being explored. To circumvent this deficiency, this paper proposes a new generalized logarithmic spatial heteroscedasticity model with exogenous variables (denoted by the log-SHE model) to study the spatial dependence in variance. For the log-SHE model, its spatial near-epoch dependence (NED) property is investigated, and a systematic statistical inference procedure is provided, including the maximum likelihood and generalized method of moments estimators, the Wald, Lagrange multiplier and likelihood-ratio-type D tests for model parameter constraints, and the overidentification test for the model diagnostic checking. Using the tool of spatial NED, the asymptotics of all proposed estimators and tests are established under regular conditions. The usefulness of the proposed methodology is illustrated by simulation results and a real data example on the house selling price.
... The reason we chose 2005 is that there are insufficient data for the variable environmental sustainability policies and institutions prior to 2005, so we chose 2005 as the baseline year for all variables because this variable is critical to this study. The data for the variables used in this study, CO emissions, overexploitation of natural resources and forest reserves, environmental sustainability policies and institutions, foreign direct investment, domestic investment, international tourism, trade openness, economic growth, and urbanization, were collected from the World Bank following [32][33][34][35][36]. The following Table 1 provides a brief description of the variables used in this study. ...
Article
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Persistent drought is not a unique phenomenon in East African countries, different research findings cite different reasons for it, but the environmental problem is currently a major concern worldwide and in East African country (EAC) the problem is not an exception to this phenomenon; policymakers and researchers are interested in knowing the cause in order to mitigate environmental degradation and support policies and institutions for environmental sustainability. Therefore, this study examines the environmental sustainability laws and institutions in 18 EAC to determine the relationship between foreign direct investment and environmental quality. Using the generalized method of moments for analysis, the results show, among other things, that foreign direct investment, when associated with environmental sustainability policies and institutions, improves environmental quality in the long run while degrading it in the short run. Long- and short-run environmental improvements in EAC are also enabled by domestic investment, environmental sustainability institutions, and policies. The study, therefore, concludes that environmental sustainability institutions and policies are critical in EAC because they improve environmental quality and interact with foreign direct investment in the long run. Therefore, the study recommends that policymakers and other stakeholders in EAC take action to improve environmental quality and sustainable economies.
... We apply the VAR panel model selection procedure developed by Abrigo and Love (2016). The model selection method calculates the coefficient of determination of the overall model, Hansen's statistic (Hansen, (1982) in Lee (2014), and the corresponding p-value. The model selection criterias are all based on the J Hansen statistic. ...
Article
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The direction of globalization and the integration of the financial system continue to increase, in line with the increasing capital flows, which is the focus of discussion in this research. This study applies panel data analysis to analyze banking behavior in order to improve its performance. The analysis uses panel data from 1991 to 2020 in 39 countries. Return on Equity (ROE) as a measure of the success of banking operations is determined by various interrelated factors. One of the variables closely related to banking performance is the share of non-financial business loans, the share of capital inflows entering the banking sector, and the share of capital inflows entering the non-bank sector. Economic variables that support good banking performance are GDP growth, bank concentration, inflation, leverage, and bank efficiency. This article applies a Panel Vector Autoregressive to capture the dynamization, and heterogeneity. The most exciting results were obtained by dividing the sample into subgroups, which helped the researcher understand each regime's different roles and transmissions. The changes in capital inflows to the non-bank sector will significantly reduce ROE and increase leverage for the next five periods. The results of the study imply that nowadays, bank managers should be aware while the changes in capital inflows change very quickly. Bank managers in countries with high capital inflows must always be aware of changes in capital inflows to the non-bank sector—steps to bank management by diversifying sources of funds efficiently from other parties in the transmission of credit channel.
... The twostep SGMM estimator employs an optimal weighting matrix for the moment conditions. To satisfy the consistency of the GMM estimator, we use the Arellano-Bond AR (1) and AR (2) tests of the serial correlation properties and the Hansen [85] J-test of over-identifying restrictions. By using this, we validate the assumption that lagged values of the explanatory variables are valid instruments. ...
Article
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The paper focuses on the impact of food aid and governance quality (the latter disaggregated in different components) on both food and nutrition security in the SSA region and for a sample of 25 countries over the period 1996 to 2018. The main novelty and contribution of the paper in the relevant literature is by providing macro-level evidence in the SSA region to complement country-specific evidence in this research area. We also use different food and nutrition security outcome measures, which include the average value of food production, average dietary energy supply adequacy, and prevalence of undernourishment. Furthermore, we combine the above with the use of both aggregated and disaggregated governance indicators to examine the impact of governance quality on the outcome variables. We find evidence of a robust relationship between food aid, governance quality, and food and nutrition security outcomes by employing the GMM estimator. We also find that food aid increases food and nutrition security while it reduces undernourishment. Among the various governance quality indicators we have employed, the control of corruption and political stability show a significant relationship with the measured outcomes. However, the composite governance index and food aid jointly have no significant effect on food security, but they significantly increase nutrition security and reduce undernourishment across the various empirical models we have employed in our empirical analysis. An important policy lesson emanating from our empirical findings is that controlling corruption and maintaining political stability may have significant implications for enhancing the impact of food aid on food and nutrition security in the region.
... We estimate the demand using the standard procedure for the BLP-type model. The estimation algorithm is a nested fixed point (NFP) algorithm (Berry, Levinsohn, and Pakes, 1995), which roughly includes two loops-an inner, contract-mapping loop to infer mean utility, δ , and an outer loop for nonlinear GMM estimation (Hansen, 1982)-to obtain the parameter matrix θ θ θ 2 . (See Berry, Levinsohn, and Pakes, 1995;Nevo, 2001, for a detailed description.) ...
Article
Berkeley's sugar tax policy is currently under intense scrutiny and debate, while similar tax policies are rapidly expanding to other U.S. states. Contrary to theoretical predictions and policy expectations, previous literature documents short-term evidence of increased consumption of sugary drinks in response to a sugar tax policy. We investigate the underlying mechanism behind this behavioral anomaly using the Berry, Levinsohn, and Pakes (BLP) random coefficient (RC) logit demand model in characteristic space. We find that the consumption increase is mainly driven by a change in the average valuation of the sugar content going from negative to positive following enactment of the sugar tax policy.
... Thanks to the generalization of the method of moments, the problem of heteroscedasticity of the residual component is also solved with the two-step corrected model. The method itself was originally constructed in their work by Andersen and Hsiao (1981) and subsequently by Hansen (1982). However, Arellano and Bond (1991) also contributed to its development and pointed out the problem of serial correlation across the idiosyncratic errors, which can be understood as a panel residual component. ...
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Despite interest in financial management, few studies have considered paying attention to the ownership structure among stockholders. Two alternative approaches related to the ownership structure are generally regarded as the leading cause of different management behaviours. First, managers should be less controlled in the case of less concentrated ownership with many owners, and thus could be more willing to not cooperate in the interests of owners. Second, vice versa, the less concentrated ownership structure causes the more pronounced control of management, and hence the pressure on its functioning. The results of this paper have proven the second approach in one country and just suggested the first among two different countries belonging to the EU leaders within the automotive industry. Furthermore, this study reveals that, without deploying techniques, subsequently introduced a modified version of GMM estimators with panel data by providing an implementation using Stata statistical software. Otherwise, these particular econometric tools to analyse a dynamic panel can often give false significant estimates. JEL classification:C58, D25, E21, G39
... This research applied the general dynamic GMM assuming (a) some regressors may be determined endogenously, (b) past value influences current value, (c) uncorrelation of the idiosyncratic shock across N, (d) T may be small, and (e) some regressors are not strictly exogenous. This research also used some diagnostic tests to confirm its reliability like (a) serial correlation test to confirm the absence of serial correlation (i.e., first and second-order serial correlations) [114] (b) the Sargan test to check the overall validity of the instruments, and (c) the Hansen [117] test to check instrument validity [7]. Table 3 reveals the summary statistics of variables in four income groups (see Appendix A). ...
Article
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Natural disasters do occur and have become a global problem due to increasing intensity. Developing countries are mostly affected due to natural disasters owing to a poor environment, feeble adaptation, impoverished socioeconomic conditions, poor infrastructure, limited resources, and unstable institutions. The SDG 11.5 target which highlights the mitigation of loss due to natural disasters––remains crucial to achieving sustainable cities and human settlements––but the literature is limited on this scope. Thus, this research contributes to the literature by incorporating an infrastructure index, foreign direct investment (FDI), human capital index, globalization, and capital formation into the disaster-growth debate across four-income groups in 98 countries from 1995 to 2019. We developed infrastructure and human capital indices using a standard procedure across all income groups. The two-step generalized method of moments employed herein confirmed the income reduction effect of natural disasters. While the economic cost of natural disasters is relatively high in low-income countries and mild in high- and upper-middle-income countries. Besides, infrastructural development, FDI, human capital, globalization, and gross fixed capital formation also affect economic growth across income groups. Thus, the enhancement of socio-economic policies could decline economic losses, especially in vulnerable and poor settlements in developing countries.
... We applied the GMM approach because the ordinary least squares (OLS) regression methodology does not address the problem of endogeneity that occurs when the independent variables are correlated with the error term. To address this problem and obtain reliable estimates, we use the Generalized Method of Moments (GMM) introduced by Hansen (1982). The GMM model also controls for autocorrelation and heteroskedasticity of unknown form (Musa et al, 2021). ...
Article
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This paper investigates the effect of abnormal increase in credit supply on economic growth in Nigeria after controlling for the quality of the legal system, size of central bank asset, banking sector cost efficiency and bank insolvency risk. We employ the GMM regression methodology to estimate the effect of abnormal increase in credit supply on two measures of economic growth in Nigeria. We find that abnormal increase in credit supply has a significant effect on economic growth. Abnormal increase in credit supply increases real GDP growth. Abnormal increase in credit supply decreases real GDP per capita during the global financial crisis. Abnormal increase in domestic credit to private sector has a significant positive effect on GDP per capita when there is strong legal system quality in Nigeria. In contrast, abnormal increase in domestic credit to private sector has a significant negative effect on real GDP growth when there is strong legal system quality in Nigeria.
... As shown in the Table, we reject the null hypothesis of no cross-sectional dependence based on Frees and Friedman cross-sectional dependence tests in all of the models. However, based on Pesaran cross-sectional dependence test, we can only reject the null hypothesis of cross-sectional independence only in model 4. Hansen's (1982) J-statistical test for over-identifying restrictions. Based on the coefficient of determination, the optimal lag length that minimises the three aforementioned criteria is the right lag length to be used for conducting the panel VAR Granger causality test. ...
Preprint
This study adopted a novel quantile regression via moments to explore the effects of military spending on the distribution of economic growth of 14 MENA countries over the period from 1981 to 2019. The method, apart from enabling us to investigate the effects of military spending on the distribution of economic growth at different quantiles, also helps to address issues of heterogeneity and endogeneity characterising the panel studies. Our results showed that irrespective of measures of military spending and economic growth, an upsurge in military spending leads to a positive effect on economic growth at different quantiles, suggesting that military spending is productive and growth-enhancing in the MENA countries
... Bu çalışmada 30 numaralı model, Hansen (1982) Öncelikle modelde kullanılan değişkenlerin birim kök taşıyıp taşımadığı nı tespit edebilmek için Genişletilmiş Dickey-Fuller (ADF) testi ve kırılmaların içsel olduğunu kabul eden Zivot Andrews (ZA) testi yapılmıştır. ZA testine göre ise tüm değişkenler durağan bulunmuşken ADF testine göre kapasite kullanım oranı dışında tüm değişkenler durağan bulunmuştur (EK 5A-5B). ...
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Output gap is defined as the difference between the potential output and actual output. There are several approaches used in the literature to estimate output gap. With this study it is aimed to obtain alternative output gap estimations for Turkish Economy, considering the constraints of approaches that are used in the literature. With this aim, output gap is estimated using two methods such as (1) Structural VAR (Sutructural Vector Autoregressive Model-SVAR) approach proposed in Blanchard and Quah (1989), and (2) Modified Hodrick Prescott Filter based on ARIMA model proposed in Kaiser ve Maravall (2005). These methods are compared to the most frequently used HP filter method in the literature. The output gap estimations are compared in terms of their actual inflation prediction power considering that output gap estimation is an essential input in structuring price stability policy. As a result it can be asserted that output gap estimated by SVAR method produces more successful results in predicting actual inflation. Özet: Çıktı açığı, üretimin fiili ve potansiyel seviyeleri arasındaki fark olarak tanımlanmaktadır. Yazında çıktı açığının tahmininde kullanılan çeşitli yaklaşımlar bulunmaktadır. Bu çalışmada yazındaki yöntemlerin kısıtlarını da göz önünde bulundurarak Türkiye ekonomisi için alternatif çıktı açığı tahminleri elde edilmesi amaçlanmıştır. Bu amaçla (1) Türkiye ekonomisi için Blanchard ve Quah (1989) tarafından önerilen Yapısal VAR (SVAR) modeli, (2) Kaiser ve Maravall (2005) tarafından önerilen ARIMA modeline dayalı "Uyarlanmış Hodrick-Prescott filtresi" (Modified HP) yöntemleriyle çıktı açığı tahmin edilmiştir. Bu yöntemler yazında en çok kullanılan HP filtresi yöntemiyle karşılaştırılmıştır. Çalışmada çıktı açığı tahmininin fiyat istikrarı politikası oluşturulmasında çok önemli bir girdi olduğu göz önünde bulundurularak elde edilen çıktı açığı tahminleri, gerçekleşen enflasyonu açıklama güçleri açısından karşılaştırılmıştır. Ampirik bulgularımız SVAR yöntemiyle tahmin edilen çıktı açığının cari enflasyonu açıklamakta daha başarılı sonuçlar ürettiği yönündedir.
... The adoption of internal instruments to address the endogeneity issue due to the reverse causality between exports and the rule of law could raise some concerns about the adequacy of the SYS-GMM estimator. However, we verified the validity of all moment conditions (by implementing Hansen's (1982) J test of over-identifying restrictions, which resulted in being not statistically significant), and the absence of second-order autocorrelation is confirmed (by adopting the Arellano and Bond test, which resulted in being not statistically significant as well), the SYS-GMM proves to be a suitable method for a dynamic panel model (Granato et al., 2015). ...
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... Further, another issue can arise in panel data analysis: heteroscedasticity. Therefore, to avoid endogeneity and heteroscedasticity problems, we used the GMM model developed by Hansen (1982) to estimate equations. ...
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... with respect to Θ, using the optimal weighting matrix Ω −1 which corresponds the inverse of the covariance of h i (Hansen, 1982), hence that of ∆AT T . Let us rewrite this problem as ...
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... The Sargan/ Hansen test for overidentifying restrictions and the second-order serial correlation test AR (2) test were initially carried out to assess the issue of endogeneity and the validity of the instruments. The GMM system technique was used to apply the Sargan and Hansen test of overidentifying restrictions as suggested by Arellano and Bond (1991) and Hansen (1982). Given that the probability values for the Sagan/Hansen test and the AR (2) test were not significant at 5%, confirm that there was no second-order serial correlation. ...
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Lars Peter Hansen is the David Rockefeller Distinguished Service Professor of Economics at the University of Chicago. His research spans econometrics, macroeconomics, asset pricing, and decision theory and focuses on quantitative implications of decision-making under uncertainty for macroeconomic dynamics, valuation, and economic policy. His contributions to econometrics facilitated formal study of testable implications of economic models, his work on asset pricing laid some of the foundations of a field that is now called macro-finance, while his analysis of ways that econometricians and economic agents cope with uncertainty and potential model misspecification opened new directions for building empirically relevant models in macroeconomics and finance. Hansen received his PhD from the University of Minnesota in 1978, and his wide-ranging contributions were rewarded in 2013 with the Nobel Memorial Prize in Economic Sciences.
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This paper describes methods for conveniently formulating and estimating dynamic linear econometric models under the hypothesis of rational expectations. An econometrically convenient formula for the cross-equation rational expectations restrictions is derived. Models of error terms and the role of the concept of Granger causality in formulating rational expectations models are both discussed. Tests of the hypothesis of strict econometric exogeneity along the lines of Sims's are compared with a test that is related to Wu's.
Article
This paper is a revised version of a paper originally en.titled "Asymptotic Properties of Nonlinear Weighted Least Squares Estimators with Independem not Identically Distributed Regressors." In Section 2, the strong consistency of a class of weighted least squares (WLS) estimators is proven under general conditions, as well as the strong consistency of weighted least squares with estimated weights (EWLS). Conditions which ensure asymptotic normality of the estimators are provided in Section 3, and a general statistic for testing hypotheses is given. In Section 4, consequences of misspecification are discussed and a test for misspecification is given. Section 5 contains a summary and concluding remarks. As should be expected, the condi- tions obtained are natural extensions of those found in the fixed regressor case. Also, the unconditional covariance matrix of the parameter estimates has a more general form than the usual conditional covariance matrix
After Keynesian Macroeconomics," in After the Phillips Curve: Persistence of High Inflation and High Unemployment
• R E Lucas
• Jr And
• T J Sargent
LUCAS, R. E., JR., AND T. J. SARGENT: "After Keynesian Macroeconomics," in After the Phillips Curve: Persistence of High Inflation and High Unemployment. Boston: Federal Reserve Bank of Boston, 1978.
The Estimation of Relationships with Autocorrelated Residuals by the Use of Instrumental Variables
POI -: "The Estimation of Relationships with Autocorrelated Residuals by the Use of Instrumental Variables," Journal of the Royal Statistical Society B, 21(1959), 91-105.
The reference numbering from the original has been maintained in this citation list. 11 The Estimation of Economic Relationships using
NOTE: The reference numbering from the original has been maintained in this citation list. 11 The Estimation of Economic Relationships using Instrumental Variables J. D. Sargan Econometrica, Vol. 26, No. 3. (Jul., 1958), pp. 393-415.
The reference numbering from the original has been maintained in this citation list. 2 The Maximum Likelihood and the Nonlinear Three-Stage Least Squares Estimator in the General Nonlinear Simultaneous Equation Model Takeshi Amemiya Econometrica
NOTE: The reference numbering from the original has been maintained in this citation list. 2 The Maximum Likelihood and the Nonlinear Three-Stage Least Squares Estimator in the General Nonlinear Simultaneous Equation Model Takeshi Amemiya Econometrica, Vol. 45, No. 4. (May, 1977), pp. 955-968.
Nonlinear Regression on Cross-Section DataHeteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity
WHITE, H.: "Nonlinear Regression on Cross-Section Data," Econometrica, 48(1980), 721-746. [331 -: "Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, 48(1980), 817-838.
org/sici?sici=0012-9682%28198004%2948%3A3%3C721%3ANROCD%3E2.0.CO%3B2-R 33 A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity Halbert White Econometrica
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org/sici?sici=0003-4851%28195812%2929%3A4%3C1046%3AAMOGBA%3E2.0.CO%3B2-U 17 Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis Lars Peter Hansen
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Stable URL: http://links.jstor.org/sici?sici=0003-4851%28195812%2929%3A4%3C1046%3AAMOGBA%3E2.0.CO%3B2-U 17 Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis Lars Peter Hansen; Robert J. Hodrick The Journal of Political Economy, Vol. 88, No. 5. (Oct., 1980), pp. 829-853.
org/sici?sici=0012-9682%28198103%2949%3A2%3C491%3AWDEKAE%3E2.0.CO%3B2-X 10 A Method of Generating Best Asymptotically Normal Estimates with Application to the Estimation of Bacterial Densities Thomas S. Ferguson The Annals of
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Stable URL: http://links.jstor.org/sici?sici=0012-9682%28198103%2949%3A2%3C491%3AWDEKAE%3E2.0.CO%3B2-X 10 A Method of Generating Best Asymptotically Normal Estimates with Application to the Estimation of Bacterial Densities Thomas S. Ferguson The Annals of Mathematical Statistics, Vol. 29, No. 4. (Dec., 1958), pp. 1046-1062.
jstor.org/sici?sici=0012-9682%28195807%2926%3A3%3C393%3ATEOERU%3E2.0.CO%3B2-R 32 Nonlinear Regression on Cross-Section Data Halbert White Econometrica
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org/sici?sici=0022-3808%28198010%2988%3A5%3C829%3AFERAOP%3E2.0.CO%3B2-J 21 An Instrumental Variable Approach to Full Information Estimators for Linear and Certain Nonlinear Econometric Models Jerry A
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Stable URL: http://links.jstor.org/sici?sici=0022-3808%28198010%2988%3A5%3C829%3AFERAOP%3E2.0.CO%3B2-J 21 An Instrumental Variable Approach to Full Information Estimators for Linear and Certain Nonlinear Econometric Models Jerry A. Hausman Econometrica, Vol. 43, No. 4. (Jul., 1975), pp. 727-738.
org/sici?sici=0012-9682%28195807%2926%3A3%3C393%3ATEOERU%3E2.0.CO%3B2-R 11 The Maximum Likelihood and the Nonlinear Three-Stage Least Squares Estimator in the General Nonlinear Simultaneous Equation Model Takeshi Amemiya Econometrica
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Stable URL: http://links.jstor.org/sici?sici=0012-9682%28195807%2926%3A3%3C393%3ATEOERU%3E2.0.CO%3B2-R 11 The Maximum Likelihood and the Nonlinear Three-Stage Least Squares Estimator in the General Nonlinear Simultaneous Equation Model Takeshi Amemiya Econometrica, Vol. 45, No. 4. (May, 1977), pp. 955-968.
org/sici?sici=0022-3808%28198010%2988%3A5%3C829%3AFERAOP%3E2.0.CO%3B2-J 22 The Estimation of Economic Relationships using
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Stable URL: http://links.jstor.org/sici?sici=0022-3808%28198010%2988%3A5%3C829%3AFERAOP%3E2.0.CO%3B2-J 22 The Estimation of Economic Relationships using Instrumental Variables J. D. Sargan Econometrica, Vol. 26, No. 3. (Jul., 1958), pp. 393-415.