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On the relevance of weaker instruments
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Antoine, Bertille and Renault, Eric (2017) On the relevance of weaker instruments. Econometric Reviews, 36 (6-9). pp. 928-945. doi:10.1080/07474938.2017.1307598 ISSN 0747-4938.
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Official URL: http://doi.org/10.1080/07474938.2017.1307598
Abstract
We study the asymptotic properties of the standard GMM estimator when additional moment restrictions, weaker than the original ones, are available. We provide conditions under which these additional weaker restrictions improve the efficiency of the GMM estimator. To detect “spurious” identification that may come from invalid moments, we rely on the Hansen J-test that assesses the compatibility between existing restrictions and additional ones. Our simulations reveal that the J-test has good power properties and that its power increases with the weakness of the additional restrictions. Our theoretical characterization of the J-test provides some intuition for why that is.
Item Type: | Journal Article | ||||||
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Divisions: | Faculty of Social Sciences > Economics | ||||||
Journal or Publication Title: | Econometric Reviews | ||||||
Publisher: | Taylor & Francis Inc. | ||||||
ISSN: | 0747-4938 | ||||||
Official Date: | 10 May 2017 | ||||||
Dates: |
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Volume: | 36 | ||||||
Number: | 6-9 | ||||||
Page Range: | pp. 928-945 | ||||||
DOI: | 10.1080/07474938.2017.1307598 | ||||||
Status: | Peer Reviewed | ||||||
Publication Status: | Published | ||||||
Access rights to Published version: | Restricted or Subscription Access |
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