A TEST FOR STRUCTURAL STABILITY OF EULER CONDITIONS PARAMETERS ESTIMATED VIA THE GENERALIZED METHOD OF MOMENTS ESTIMATOR.

A predictive test for parameter stability of GMM estimates is studied. The test is based on examining whether parameter estimates of one subsample can be used to predict over the other subsample. It applies to a wide variety of dynamic, nonlinear simultaneous equation models for the wide class of inference methods covered by GMM. The asymptotic properties and local power are derived. It is shown that the test has equal asymptotic power against local alternatives in both subsamples regardless of which subsample is conditioned on. The test is also compared with tests proposed by Andrews and Fair (1988). [ABSTRACT FROM AUTHOR]