Baum, Christopher, Mark Schaffer, and Steven Stillman. “Instrumental variables and GMM”. Boston College Working Papers in Economics 545, 2002.
We discuss instrumental variables (IV) estimation in the broader context of the generalized method of moments (GMM), and describe an extended IV estimation routine that provides GMM estimates as well as additional diagnostic tests. Stand-alone test procedures for heteroskedasticity, overidentification, and endogeneity in the IV context are also described.