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Define GMM Moment Conditions for Prono Triangular System

Source: R/lewbel-gmm.R
prono_triangular_moments.Rd

Creates the moment function for GMM estimation of a triangular system using Prono's GARCH-based identification.

Usage

prono_triangular_moments(
  theta,
  data,
  y1_var,
  y2_var,
  x_vars,
  garch_order = c(1, 1),
  add_intercept = TRUE
)

Arguments

theta

Numeric vector. Parameters to estimate: c(beta1, gamma1, beta2).

data

Data frame containing the variables.

y1_var

Character. Name of the first dependent variable (default: "Y1").

y2_var

Character. Name of the second dependent variable/endogenous regressor (default: "Y2").

x_vars

Character vector. Names of exogenous variables.

garch_order

GARCH(p,q) order for conditional variance estimation.

add_intercept

Logical. Whether to add an intercept to the exogenous variables.

Value

Matrix of moment conditions (n x q).

References

Prono, T. (2014). The Role of Conditional Heteroskedasticity in Identifying and Estimating Linear Triangular Systems, with Applications to Asset Pricing Models That Include a Mismeasured Factor. Journal of Applied Econometrics, 29(5), 800-824. doi:10.1002/jae.2387

See also

prono_gmm for the main GMM estimation function. run_single_prono_simulation for 2SLS estimation.