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Factor-GMM estimation with large sets of possibly weak instruments

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  • Kapetanios, George
  • Marcellino, Massimiliano

Abstract

The use of factor analysis for instrumental variable estimation when the number of instruments tends to infinity is analysed. In particular, the focus is on situations where many weak instruments exist and/or the factor structure is weak. Theoretical results, simulation experiments and empirical applications highlight the relevance of Factor-GMM estimation, which is also easily implemented.

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Bibliographic Info

Article provided by Elsevier in its journal Computational Statistics & Data Analysis.

Volume (Year): 54 (2010)
Issue (Month): 11 (November)
Pages: 2655-2675

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Handle: RePEc:eee:csdana:v:54:y:2010:i:11:p:2655-2675

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Web page: http://www.elsevier.com/locate/csda

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Keywords: Factor models Principal components Instrumental variables GMM Weak instruments DSGE models;

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References

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Citations

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Cited by:
  1. Stephane Dees & M. Hashem Pesaran & L. Vanessa Smith & Ron P. Smith, 2009. "Identification of New Keynesian Phillips Curves from a Global Perspective," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(7), pages 1481-1502, October.
  2. Hubrich, Kirstin & Marcellino, Massimiliano & Beck, Günter W., 2011. "On the importance of sectoral and regional shocks for price-setting," Working Paper Series 1334, European Central Bank.
  3. Huang, Yongfu & Quibria, M. G., 2013. "The global partnership for sustainable development," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  4. M. Hashem Pesaran & Elisa Tosetti, 2007. "Large Panels with Common Factors and Spatial Correlations," CESifo Working Paper Series 2103, CESifo Group Munich.
  5. Gachet, Ivan & Maldonado, Diego & Pérez, Wilson, 2008. "Determinantes de la Inflación en una Economía Dolarizada: El Caso Ecuatoriano
    [Determinants of Inflation in a Dollarized Economy: The Case of Ecuador]
    ," MPRA Paper 17101, University Library of Munich, Germany.
  6. Travaglini, Guido, 2010. "Supervised Principal Components and Factor Instrumental Variables. An Application to Violent CrimeTrends in the US, 1982-2005," MPRA Paper 22077, University Library of Munich, Germany.
  7. Beck, Guenter W. & Hubrich, Kirstin & Marcellino, Massimiliano, 2009. "On the importance of sectoral shocks for price-setting," CFS Working Paper Series 2009/32, Center for Financial Studies (CFS).
  8. Jennifer Castle & David Hendry, 2013. "Forecasting and Nowcasting Macroeconomic Variables: A Methodological Overview," Economics Series Working Papers 674, University of Oxford, Department of Economics.

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