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Optimal Inference With Many Instruments

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Author Info
Hahn, Jinyong
Abstract

In this paper, I derive the efficiency bound of the structural parameter in a linear simultaneous equations model with many instruments. The bound is derived by applying a convolution theorem to Bekker s (1994, Econometrica 62, 657 681) asymptotic approximation, where the number of instruments grows to infinity at the same rate as the sample size. Usual instrumental variables estimators with a small number of instruments are heuristically argued to be efficient estimators in the sense that their asymptotic distribution is minimal. Bayesian estimators based on parameter orthogonalization are heuristically argued to be inefficient.

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File URL: http://journals.cambridge.org/abstract_S0266466602181084
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Publisher Info
Article provided by Cambridge University Press in its journal Econometric Theory.

Volume (Year): 18 (2002)
Issue (Month): 01 (February)
Pages: 140-168
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Handle: RePEc:cup:etheor:v:18:y:2002:i:01:p:140-168_18

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  1. T. W. Anderson & Naoto Kunitomo & Yukitoshi Matsushita, 2006. "A New Light from Old Wisdoms : Alternative Estimation Methods of Simultaneous Equations with Possibly Many Instruments," CIRJE F-Series CIRJE-F-399, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  2. Shane M. Sherlund, 2004. "Quasi Empirical Likelihood Estimation of Moment Condition Models," Econometric Society 2004 North American Summer Meetings 507, Econometric Society. [Downloadable!]
  3. Fröhlich, Markus & Lechner, Michael, 2004. "Regional Treatment Intensity as an Instrument for the Evaluation of Labour Market Policies," CEPR Discussion Papers 4304, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. John Chao & Norman Swanson, 2004. "Estimation and Testing Using Jackknife IV in Heteroskedastic Regressions With Many Weak Instruments," Departmental Working Papers 200420, Rutgers University, Department of Economics. [Downloadable!]
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  5. Kazuhiko Hayakawa, 2006. "Efficient GMM Estimation of Dynamic Panel Data Models Where Large Heterogeneity May Be Present," Hi-Stat Discussion Paper Series d05-130, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  6. Donald W.K. Andrews & James H. Stock, 2005. "Inference with Weak Instruments," Cowles Foundation Discussion Papers 1530, Cowles Foundation, Yale University. [Downloadable!]
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  7. Mathias D. Cattaneo & Richard K. Crump & Michael Jansson, 2007. "Optimal Inference for Instrumental Variables Regression with non-Gaussian Errors," CREATES Research Papers 2007-11, School of Economics and Management, University of Aarhus. [Downloadable!]
  8. T. W. Anderson & Naoto Kunitomo & Yukitoshi Matsushita, 2008. "On the Asymptotic Optimality of the LIML Estimator with Possibly Many Instruments," CIRJE F-Series CIRJE-F-542, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  9. Stanislav Anatolyev, 2005. "Optimal Instruments in Time Series: A Survey," Working Papers w0069, Center for Economic and Financial Research (CEFIR). [Downloadable!]
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