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Indirect inference : which moments to match?

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Frazier, David T. and Renault, Eric (2019) Indirect inference : which moments to match? Econometrics, 7 (1). 14. doi:10.3390/econometrics7010014

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Official URL: https://doi.org/10.3390/econometrics7010014

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Abstract

The standard approach to indirect inference estimation considers that the auxiliary parameters, which carry the identifying information about the structural parameters of interest, are obtained from some recently identified vector of estimating equations. In contrast to this standard interpretation, we demonstrate that the case of overidentified auxiliary parameters is both possible, and, indeed, more commonly encountered than one may initially realize. We then revisit the “moment matching” and “parameter matching” versions of indirect inference in this context and devise efficient estimation strategies in this more general framework. Perhaps surprisingly, we demonstrate that if one were to consider the naive choice of an efficient Generalized Method of Moments (GMM)-based estimator for the auxiliary parameters, the resulting indirect inference estimators would be inefficient. In this general context, we demonstrate that efficient indirect inference estimation actually requires a two-step estimation procedure, whereby the goal of the first step is to obtain an efficient version of the auxiliary model. These two-step estimators are presented both within the context of moment matching and parameter matching. View Full-Text

Item Type: Journal Article
Subjects: B Philosophy. Psychology. Religion > BC Logic
H Social Sciences > HB Economic Theory
Q Science > QA Mathematics
Divisions: Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH): Parameter estimation, Inference, Econometrics
Journal or Publication Title: Econometrics
Publisher: MDPI
ISSN: 2225-1146
Official Date: 19 March 2019
Dates:
DateEvent
19 March 2019Published
7 March 2019Accepted
Date of first compliant deposit: 12 March 2019
Volume: 7
Number: 1
Article Number: 14
DOI: 10.3390/econometrics7010014
Status: Peer Reviewed
Publication Status: Published
Publisher Statement: This is a pre-copyedited, author-produced version of an article accepted for publication in Econometrics Journal following peer review. The version of record [insert complete citation information here] is available online at: xxxxxxx [insert URL and DOI of the article on the OUP website].
Access rights to Published version: Open Access
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