Identification using stability restrictions

Leandro Magnusson; S. Mavroeidis

doi:10.3982/ECTA9612

Identification using stability restrictions

Leandro Magnusson, S. Mavroeidis

Research output: Contribution to journal › Article › peer-review

23 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 language	English
Pages (from-to)	1799-1851
Journal	Econometrica
Volume	82
Issue number	5
DOIs	https://doi.org/10.3982/ECTA9612
Publication status	Published - 2014

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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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SN - 0012-9682

VL - 82

SP - 1799

EP - 1851

JO - Econometrica

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Identification using stability restrictions

Abstract

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