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A Comparison of First-Difference and Forward Orthogonal Deviations GMM

Robert F. Phillips

arXiv 30 Jul 2019 · Econometrics · 2 citations (OpenAlex)

arXiv:1907.12880 · PDF · DOI · OpenAlex · Extracted main text

Abstract

This paper provides a necessary and sufficient instruments condition assuring two-step generalized method of moments (GMM) based on the forward orthogonal deviations transformation is numerically equivalent to two-step GMM based on the first-difference transformation. The condition also tells us when system GMM, based on differencing, can be computed using forward orthogonal deviations. Additionally, it tells us when forward orthogonal deviations and differencing do not lead to the same GMM estimator. When estimators based on these two transformations differ, Monte Carlo simulations indicate that estimators based on forward orthogonal deviations have better finite sample properties than estimators based on differencing.

Citation extraction

9
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40
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7,372
main-text words

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Most heavily cited references

The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.

ReferenceIntensityMentionsSectionsMain text
1(2019) Phillips, R. F. (2019a)1.000104100%
2(1995) Arellano, M., & Bover, O. (1995)1.00053100%
3(1998) Blundell, R. & Bond, S. (1998)0.84333100%
4(2019) Phillips, R. F. (2019b)0.81142100%
5(2008) Hayakawa, K. (2009)0.51121100%
6(2017) Hsiao, C. & Zhou, Q. (2017)0.51121100%
Phillipsunmatched citation key Phillips0.51121100%
8(1992) Schmidt, P., Ahn, S. C., & Wyhowski, D. (1992)0.51121100%
Ahnunmatched citation key Ahn0.40511100%
Arellanounmatched citation key Arellano0.40511100%

Showing the top 10 of 18 scored citations. 3 of these could not be matched to a bibliography entry, so only the citation key is shown.