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GMM Estimation of Empirical Growth Models

GMM Estimation of Empirical Growth Models,Stephen Roy Bond,Anke Hoeffler,Jonathan Temple

GMM Estimation of Empirical Growth Models   (Citations: 211)
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This Paper highlights a problem in using the first-differenced GMM panel data estimator to estimate cross-country growth regressions. When the time series are persistent, the first-differenced GMM estimator can be poorly behaved, since lagged levels of the series provide only weak instruments for subsequent first-differences. Revisiting the work of Caselli, Esquivel and Lefort (1996), we show that this problem may be serious in practice. We suggest using a more efficient GMM estimator that exploits stationarity restrictions and this approach is shown to give more reasonable results than first-differenced GMM in our estimation of an empirical growth model.
Published in 2001.
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