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Factor-GMM estimation with large sets of possibly weak instruments

  • Kapetanios, George
  • Marcellino, Massimiliano

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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File URL: http://www.sciencedirect.com/science/article/pii/S0167-9473(10)00153-2
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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
Contact details of provider: Web page: http://www.elsevier.com/locate/csda

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  12. Massimiliano Marcellino & Carlo A. Favero & Francesca Neglia, 2005. "Principal components at work: the empirical analysis of monetary policy with large data sets," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(5), pages 603-620.
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  21. Mario Forni & Marc Hallin & Marco Lippi & Lucrezia Reichlin, 2000. "The Generalized Dynamic-Factor Model: Identification And Estimation," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 540-554, November.
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  25. Giannone, Domenico & Reichlin, Lucrezia & Sala, Luca, 2002. "Tracking Greenspan: Systematic and Unsystematic Monetary Policy Revisited," CEPR Discussion Papers 3550, C.E.P.R. Discussion Papers.
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