Lanne and Saikkonen [Oxford Bulletin of Economics and Statistics (2011a) Vol. 73, pp. 581–592], show that the generalized method of moments (GMM) estimator is inconsistent, when the instruments are lags of variables that admit a non‐causal autoregressive representation. This article argues that this inconsistency depends on distributional assumptions, that do not always hold. In particular under rational expectations, the GMM estimator is found to be consistent. This result is derived in a linear context and illustrated by simulation of a nonlinear asset pricing model.