Using many moment conditions can improve efficiency but makes the usual generalized method of moments (GMM) inferences inaccurate. Two-step GMM is biased. Generalized empirical likelihood (GEL) has smaller bias, but the usual standard errors are too small in instrumental variable settings. In...

Properties of GMM estimators are sensitive to the choice of instruments. Usingmany instruments leads to high asymptotic asymptotic efficiency but can causehigh bias and/or variance in small samples. In this paper we develop and implementasymptotic mean square error (MSE) based criteria for...