Generalized Method of Moments and Optimal Instruments
نویسنده
چکیده
Part A reviews the basic estimation theory of the generalized method of moments (GMM) and Part B deals with optimal instrumental variables. 1 For the most part, we restrict attention to iid observations. Linear Regression Economists often use linear regression to quantify a relationship between economic variables. A linear regression between y and x is a relationship of the form y = x 0 β + ε (A.1) where β and ε are chosen in such a way that ε is uncorrelated with x (which typically includes a constant term). Thus, the parameter vector β satisfies
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