Identification using stability restrictions

Leandro Magnusson, S. Mavroeidis

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

© 2014 The Econometric Society. This paper studies inference in models that are identified by moment restrictions. We show how instability of the moments can be used constructively to improve the identification of structural parameters that are stable over time. A leading example is macroeconomic models that are immune to the well-known (Lucas (1976)) critique in the face of policy regime shifts. This insight is used to develop novel econometric methods that extend the widely used generalized method of moments (GMM). The proposed methods yield improved inference on the parameters of the new Keynesian Phillips curve.
Original languageEnglish
Pages (from-to)1799-1851
JournalEconometrica
Volume82
Issue number5
DOIs
Publication statusPublished - 2014

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Inference
Econometrics
Generalized method of moments
Regime shift
Structural parameters
Lucas critique
Econometric methods
New Keynesian Phillips curve
Macroeconomic models

Cite this

Magnusson, Leandro ; Mavroeidis, S. / Identification using stability restrictions. In: Econometrica. 2014 ; Vol. 82, No. 5. pp. 1799-1851.
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Identification using stability restrictions. / Magnusson, Leandro; Mavroeidis, S.

In: Econometrica, Vol. 82, No. 5, 2014, p. 1799-1851.

Research output: Contribution to journalArticle

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AB - © 2014 The Econometric Society. This paper studies inference in models that are identified by moment restrictions. We show how instability of the moments can be used constructively to improve the identification of structural parameters that are stable over time. A leading example is macroeconomic models that are immune to the well-known (Lucas (1976)) critique in the face of policy regime shifts. This insight is used to develop novel econometric methods that extend the widely used generalized method of moments (GMM). The proposed methods yield improved inference on the parameters of the new Keynesian Phillips curve.

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