Econometrics II

We were occupied with a linear model with instrumental variables where the orthogonality conditions involved the residuals and a matrix of instrumental variables. Under appropriate assumptions we derived the GMM estimator and its asymptotic properties in two cases. Firstly, in the case where the errors are uncorrelated and secondly in the case where the errors are serially correlated. We observed that the asymptotic variance of the GMME depends on the choice of the weighting matrix, so we addressed the issue of the optimal selection of this matrix. We further occupied ourselves with the consistent estimation of the asymptotic variance. You can find notes here.