GMM Estimation of an Euler Equation Model with German Firm Level Panel Data

In this paper the outlier robustGMM panel data estimator recently proposed byLucas, van Dijk, and Kloek (1994) is applied to anEuler equation model of firm investment behaviourwith imperfectly competitive product marketsfor a small panel of German nonfinancial stock companies.Plots for checking distributional implications andthe selection of tuning constants are provided.Whereas the estimation results from the usual GMM estimator wouldcontradict the theory, the empirical results using the robustGMM estimator largely support it.

Janz, Norbert (1997), GMM Estimation of an Euler Equation Model with German Firm Level Panel Data, ZEW Discussion Paper No. 97-05, Mannheim.