Resource title

Consistent Estimation with a Large Number of Weak Instruments

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Resource description

This paper analyzes the conditions under which consistent estimation can be achieved in instrumental Variables (IV) regression when the available instruments are weak, in the local-to-zero sense of Staiger and Stock (1997) and using the many-instrument framework of Morimune (1983) and Bekker (1994). Our analysis of an extended k-class of estimators that includes Jackknife IV (JIVE) establishes that consistent estimation depends importantly on the relative magnitudes of rn, the growth rate of the concentration parameter, and Kn, the number of instruments: In particular, LIML and JIVE are consistent when (Kn) 5 /rn goes to zero, while two-stage least squares is consistent only if (Kn) 5 /rn goes to zero, as n goes to infinity. We argue that the use of many instruments may be beneficial for estimation, as the resulting concentration parameter growth may allow consistent estimation, in certain cases.

Resource author

John C. Chao, Norman R. Swanson

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/23198

Resource license

Adapt according to the presented license agreement and reference the original author.