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Constrained k-class Estimators in the Presence of Weak Instruments

Listed author(s):
  • Iglesias Emma M.

    ()

    (Michigan State University and University of Essex)

In this paper, we show how we can apply the existing theory when a parameter is on a boundary (see Andrews (1999, 2000) and Iglesias and Linton (2007)) in the context of weak instruments. When we have a priori knowledge of the signs of the relationships between the instruments and the endogenous variables, we can construct constrained k-class estimators (a special case is a constrained 2SLS estimator), where the asymptotic theory in the presence of weak instruments changes in relation to the traditional weak-instrument asymptotics of the unconstrained k-class estimators of Staiger and Stock (1997). We show theoretically and in a simulation study the advantages that we have by constraining the estimator.

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Article provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.

Volume (Year): 15 (2011)
Issue (Month): 4 (September)
Pages: 1-13

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Handle: RePEc:bpj:sndecm:v:15:y:2011:i:4:n:5
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