Instrumental models and indirect encompassing
(1998) Econometrica — Vol. 66, n° 3, p. 673-688 (1998)
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- Abstract
- We introduce nonnested hypotheses tests using indirect, simulation-based estimation procedures. We propose different test statistics and carefully examine the corresponding implicit mi hypotheses. A notion of indirect encompassing comes up naturally, which may be compared to the usual encompassing conditions. Then we show how these methods extend standard specification and overidentification tests.
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Dhaene, G., Gouriéroux, C., & Scaillet, O. (1998). Instrumental models and indirect encompassing. Econometrica, 66(3), 673-688. https://doi.org/10.2307/2998579 (Original work published 1998)