GMM, Weak Instruments, and Weak Identification
نویسنده
چکیده
Weak instruments arise when the instruments in linear IV regression are weakly correlated with the included endogenous variables. In nonlinear GMM, weak instruments correspond to weak identification of some or all of the unknown parameters. Weak identification leads to non-normal distributions, even in large samples, so that conventional IV or GMM inferences are misleading. Fortunately, various procedures are now available for detecting and handling weak instruments in the linear IV model and, to a lesser degree, in nonlinear GMM. *Prepared for the Journal of Business and Economic Statistics symposium on GMM. This research was supported in part by NSF grant SBR-0214131.
منابع مشابه
A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments
Weak instruments arise when the instruments in linear instrumental variables (IV) regression are weakly correlated with the included endogenous variables. In generalized method of moments (GMM), more generally, weak instruments correspond to weak identification of some or all of the unknown parameters. Weak identification leads to GMM statistics with nonnormal distributions, even in large sampl...
متن کاملEfficient GMM with nearly-weak identification
This paper is in the line of the recent literature on weak instruments, which, following the seminal approach of Staiger and Stock (1997) and Stock and Wright (2000) captures weak identification by drifting population moment conditions. In contrast with most of the existing literature, we do not specify a priori which parameters are strongly or weakly identified. We rather consider that weaknes...
متن کاملGmm with Many Moment Conditions By
1 This paper provides a first order asymptotic theory for generalized method of moments (GMM) estimators when the number of moment conditions is allowed to increase with the sample size and the moment conditions may be weak. Examples in which these asymptotics are relevant include instrumental variable (IV) estimation with many (possibly weak or uninformed) instruments and some panel data model...
متن کاملFactor-GMM estimation with large sets of possibly weak instruments
This paper analyses the use of factor analysis for instrumental variable estimation when the number of instruments tends to infinity. We consider cases where the unobserved factors are the optimal instruments but also cases where the factors are not necessarily the optimal instruments but can provide a summary of a large set of instruments. Further, the situation where many weak instruments exi...
متن کاملValid Two-Step Identification-Robust Confidence Sets for GMM
In models with potential weak identification researchers often decide whether to report a robust confidence set based on an initial assessment of model identification. Two-step procedures of this sort can generate large coverage distortions for reported confidence sets, and existing procedures for controlling these distortions are quite limited. This paper introduces a generally-applicable appr...
متن کامل