Date: 2008
Type: Working Paper
A shrinkage instrumental variable estimator for large datasets
Working Paper, Queen Mary University of London, Working Papers, 2008/626
CARRIERO, Andrea, KAPETANIOS, George, MARCELLINO, Massimiliano, A shrinkage instrumental variable estimator for large datasets, Queen Mary University of London, Working Papers, 2008/626 - https://hdl.handle.net/1814/42340
Retrieved from Cadmus, EUI Research Repository
This paper proposes and discusses an instrumental variable estimator that can be of particular relevance when many instruments are available. Intuition and recent work (see, e.g., Hahn (2002)) suggest that parsimonious devices used in the construction of the final instruments, may provide effective estimation strategies. Shrinkage is a well known approach that promotes parsimony. We consider a new shrinkage 2SLS estimator. We derive a consistency result for this estimator under general conditions, and via Monte Carlo simulation show that this estimator has good potential for inference in small samples.
Cadmus permanent link: https://hdl.handle.net/1814/42340
ISSN: 1473-0278
Series/Number: Queen Mary University of London; Working Papers; 2008/626
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