Sargan's Instrumental Variable Estimation and GMM

• Manuel Arellano ^[1]
  1. [1] Centro de Estudios Monetarios y Financieros

     Centro de Estudios Monetarios y Financieros

     Madrid, España

     
• Localización: Documentos de Trabajo ( CEMFI ), Nº. 10 (Working Paper No. 0110, December 2001), 2001
• Idioma: inglés
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• Resumen

  • This paper surveys J. D. Sargan's work on instrumental variable estima- tion and its connections with the generalized method of moments. I first present the modelling context in which Sargan motivated instrumental vari- able estimation. Then I review the theory of instrumental variable estimation as developed in Sargan (1958). I discuss his approach to efficiency, his mini-max estimator, tests of over- and under -identification, and his later work on the finite sample properties of IV estimators. Next, Sargan's approach to modelling IV equations with serial correlation is discussed and compared to the GMM approach. Finally I describe Sargan's (1959) results for non-linear in parameters IV models.