CFDP 1791

Second-order Refinement of Empirical Likelihood for Testing Overidentifying Restrictions

Author(s): 

Publication Date: April 2011

Revision Date: January 2012

Pages: 32

Abstract: 

This paper studies second-order properties of the empirical likelihood overidentifying restriction test to check the validity of moment condition models. We show that the empirical likelihood test is Bartlett correctable and suggest second-order refinement methods for the test based on the empirical Bartlett correction and adjusted empirical likelihood. Our second-order analysis supplements the one in Chen and Cui (2007) who considered parameter hypothesis testing for overidentified models. In simulation studies we find that the empirical Bartlett correction and adjusted empirical likelihood assisted by bootstrapping provide reasonable improvements for the properties of the null rejection probabilities.

Keywords: 

Empirical likelihood; GMM; Overidentification test; Bartlett correction; Higher order analysis

JEL Classification Codes:  C12; C14

Note: 

Published in Econometric Theory (April 2013), 29(2): 324-353 [DOI]