02299cam a22002657 4500001000600000003000500006005001700011008004100028100002100069245014300090260006600233490005100299500001400350520112900364530006101493538007201554538003601626690006901662690007701731700002401808710004201832830008601874856003701960856003601997t0155NBER20170920201524.0170920s1994 mau||||fs|||| 000 0 eng d1 aBurnside, Craig.10aSmall Sample Properties of Generalized Method of Moments Based Wald Testsh[electronic resource] /cCraig Burnside, Martin Eichenbaum. aCambridge, Mass.bNational Bureau of Economic Researchc1994.1 aNBER technical working paper seriesvno. t0155 aMay 1994.3 aThis paper assesses the small sample properties of Generalized Method of Moments (GMM) based Wald statistics. The analysis is conducted assuming that the data generating process corresponds to (i) a simple vector white noise process and (ii) an equilibrium business cycle model. Our key findings are that the small sample size of the Wald tests exceeds their asymptotic size, and that their size increases uniformly with the dimensionality of joint hypotheses. For tests involving even moderate numbers of moment restrictions, the small sample size of the tests greatly exceeds their asymptotic size. Relying on asymptotic distribution theory leads one to reject joint hypothesis tests far too often. We argue that the source of the problem is the difficulty of estimating the spectral density matrix of the GMM residuals, which is needed to conduct inference in a GMM environment. Imposing restrictions implied by the underlying economic model being investigated or the null hypothesis being tested on this spectral density matrix can lead to substantial improvements in the small sample properties of the Wald tests. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aC5 - Econometric Modeling2Journal of Economic Literature class. 7aC12 - Hypothesis Testing: General2Journal of Economic Literature class.1 aEichenbaum, Martin.2 aNational Bureau of Economic Research. 0aTechnical Working Paper Series (National Bureau of Economic Research)vno. t0155.4 uhttp://www.nber.org/papers/t015541uhttp://dx.doi.org/10.3386/t0155