¹⁶In principle, the ‘habit formation’ model could be estimated by GMM, if we were willing to assert that the representative agent model with habits is a perfect description of aggregate consumption choice. One problem with nonlinear GMM estimation is that it is often difficult to be sure how much identification is coming from the higher derivatives of the Euler equation; in a context where there is an unknown amount of measurement error with an unknown distribution, this is worrisome. Also, nonlinear GMM is not really applicable for the sticky expectations model, whose full and precise implication is exactly the linear equation we estimate.