Advanced Search
MyIDEAS: Login

A Comparison of Some Recent Bayesian and Classical Procedures for Simultaneous Equation Models with Weak Instruments

Contents:

Author Info

  • Chuanming Gao

    (SUNY at Albany)

  • Kajal Lahiri

    (SUNY at Albany)

Abstract

We compare the finite sample performance of a number of Bayesian and Classical procedures for limited information simultaneous equations models with weak instruments by a Monte Carlo study. We consider recent Bayesian approaches developed by Ch ao and Phillips (1998, CP), Geweke (1996), Kleibergen and van Dijk (1998, KVD), and Zellner (1998). Amongst the Sample theory methods, OLS, 2SLS, LIML, Fuller's modified LIML, and the jackknife instrumental variable estimator (JIVE) due to Angrist, Imben s and Krueger (1999) and Blomquist and Dahlberg (1999) are also considered. Since the posterior densities and their conditionals in CP and KVD are non-standard, we propose a ''Gibbs within Metropolis-Hastings'' algorithm, which only requires the availabi lity of the conditional densities from the candidate generating density. Our results show that in cases with very weak instruments, there is no single estimator that is superior to others in all cases. When endogeneity is weak, Zellner's MELO does the best. When the endogeneity is not weak and $\rho$$w_{12}>0$, where $\rho$ is the correlation coefficient between the structural and reduced form errors, and $w_{12}$ is the covariance between the unrestricted reduced form errors, BMOM outp erforms all other estimators by a wide margin. When the endogeneity is not weak and $\beta \rho

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://fmwww.bc.edu/RePEc/es2000/0230.pdf
File Function: main text
Download Restriction: no

Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0230.

as in new window
Length:
Date of creation: 01 Aug 2000
Date of revision:
Handle: RePEc:ecm:wc2000:0230

Contact details of provider:
Phone: 1 212 998 3820
Fax: 1 212 995 4487
Email:
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Gao, Chuanming & Lahiri, Kajal, 2000. "MCMC algorithms for two recent Bayesian limited information estimators," Economics Letters, Elsevier, vol. 66(2), pages 121-126, February.
  2. Zellner, Arnold, 1978. "Estimation of functions of population means and regression coefficients including structural coefficients : A minimum expected loss (MELO) approach," Journal of Econometrics, Elsevier, vol. 8(2), pages 127-158, October.
  3. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
  4. Frank Kleibergen & Eric Zivot, 1998. "Bayesian and Classical Approaches to Instrumental Variable Regression," Discussion Papers in Economics at the University of Washington 0063, Department of Economics at the University of Washington.
  5. Joshua D. Angrist & Guido W. Imbens & Alan Krueger, 1995. "Jackknife Instrumental Variables Estimation," NBER Technical Working Papers 0172, National Bureau of Economic Research, Inc.
  6. Gao, Chuanming & Lahiri, Kajal, 2000. "Further consequences of viewing LIML as an iterated Aitken estimator," Journal of Econometrics, Elsevier, vol. 98(2), pages 187-202, October.
  7. Dwivedi, T. D. & Srivastava, V. K., 1984. "Exact finite sample properties of double k-class estimators in simultaneous equations," Journal of Econometrics, Elsevier, vol. 25(3), pages 263-283, July.
  8. Blomquist, Soren & Dahlberg, Matz, 1999. "Small Sample Properties of LIML and Jackknife IV Estimators: Experiments with Weak Instruments," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(1), pages 69-88, Jan.-Feb..
  9. Zellner, Arnold, 1998. "The finite sample properties of simultaneous equations' estimates and estimators Bayesian and non-Bayesian approaches," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 185-212.
  10. Geweke, John, 1996. "Bayesian reduced rank regression in econometrics," Journal of Econometrics, Elsevier, vol. 75(1), pages 121-146, November.
  11. repec:cup:etheor:v:12:y:1996:i:3:p:409-31 is not listed on IDEAS
  12. Buse, A, 1992. "The Bias of Instrumental Variable Estimators," Econometrica, Econometric Society, vol. 60(1), pages 173-80, January.
  13. Dreze, Jacques H, 1976. "Bayesian Limited Information Analysis of the Simultaneous Equations Model," Econometrica, Econometric Society, vol. 44(5), pages 1045-75, September.
  14. Siddhartha Chib & Edward Greenberg, 1994. "Markov Chain Monte Carlo Simulation Methods in Econometrics," Econometrics 9408001, EconWPA, revised 24 Oct 1994.
  15. Dreze, Jacques H. & Richard, Jean-Francois, 1983. "Bayesian analysis of simultaneous equation systems," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 1, chapter 9, pages 517-598 Elsevier.
  16. Zellner, Arnold & Bauwens, Luc & Van Dijk, Herman K., 1988. "Bayesian specification analysis and estimation of simultaneous equation models using Monte Carlo methods," Journal of Econometrics, Elsevier, vol. 38(1-2), pages 39-72.
  17. Kleibergen, F.R., 1998. "Conditional densities in econometrics," Econometric Institute Research Papers EI 9853, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  18. Kleibergen, Frank & van Dijk, Herman K., 1998. "Bayesian Simultaneous Equations Analysis Using Reduced Rank Structures," Econometric Theory, Cambridge University Press, vol. 14(06), pages 701-743, December.
  19. Pagan, Adrian, 1979. "Some consequences of viewing LIML as an iterated Aitken estimator," Economics Letters, Elsevier, vol. 3(4), pages 369-372.
  20. Maddala, G S & Jeong, Jinook, 1992. "On the Exact Small Sample Distribution of the Instrumental Variable Estimator," Econometrica, Econometric Society, vol. 60(1), pages 181-83, January.
  21. Fuller, Wayne A, 1977. "Some Properties of a Modification of the Limited Information Estimator," Econometrica, Econometric Society, vol. 45(4), pages 939-53, May.
  22. Maddala, G S, 1976. "Weak Priors and Sharp Posteriors in Simultaneous Equation Models," Econometrica, Econometric Society, vol. 44(2), pages 345-51, March.
  23. Zellner, A., 1992. "Bayesian and Non-Bayesian Estimation using Balanced Loss Functions," Papers 92-20, California Irvine - School of Social Sciences.
  24. Chao, J. C. & Phillips, P. C. B., 1998. "Posterior distributions in limited information analysis of the simultaneous equations model using the Jeffreys prior," Journal of Econometrics, Elsevier, vol. 87(1), pages 49-86, August.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Kleibergen, F.R. & Zivot, E., 1998. "Bayesian and classical approaches to instrumental variable regression," Econometric Institute Research Papers EI 9835, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  2. Chao & Swanson & Hausman & Newey & Woutersen, 2010. "Asymptotic Distribution of JIVE in a Heteroskedastic IV Regression with Many Instruments," Economics Working Paper Archive 567, The Johns Hopkins University,Department of Economics.
  3. Donald W.K. Andrews & James H. Stock, 2005. "Inference with Weak Instruments," Cowles Foundation Discussion Papers 1530, Cowles Foundation for Research in Economics, Yale University.
  4. Stanislav Radchenko, 2004. "Limited Information Bayesian Analysis of a Simultaneous Equation with an Autocorrelated Error Term and its Application to the U.S. Gasoline Market," Econometrics 0408001, EconWPA.
  5. Norman R. Swanson & John C. Chao, 2004. "Estimation and Testing Using Jackknife IV in Heteroskedastic Regressions with Many Weak Instruments," Econometric Society 2004 Far Eastern Meetings 668, Econometric Society.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ecm:wc2000:0230. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.