Template-type: ReDIF-Paper 1.0
Author-Name: Stephen Bond 
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Author-Workplace-Name:Nuffield College and Institute for Fiscal Studies
Author-Workplace-Homepage:http://www.nuff.ox.ac.uk/
Author-Name: Anke Hoeffler
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Author-Workplace-Name:St Antony's College and Centre for the Study of African Economics
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Author-Name:Jonathan Temple
Author-Email:jon.temple@bristol.ac.uk 
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Author-Workplace-Name:Department of Economics, University of Bristol
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Title:GMM Estimation of Empirical Growth Models 
Abstract:
 This paper highlights a problem in using the first-difference GMM panel data estimator 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.
Classification-JEL:O41, O47
Keywords: convergence, growth, generalised method of moments, weak instruments. 
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Length:35 pages
Creation-Date: 2001-09-12
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Number:2001-W21
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File-URL:http://www.nuff.ox.ac.uk/Economics/papers/2001/w21/bht10.pdf
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Handle: RePEc:nuf:econwp:0121