Factor-GMM Estimation with Large Sets of Possibly Weak Instruments

Massimiliano Marcellino and George Kapetanios

No 7726, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper analyses the use of factor analysis for instrumental variable estimation when the number of instruments tends to infinity. In particular, we focus 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.

Keywords: Factor models; Gmm; Instrumental variables; Principal components; Weak instruments; Dsge models (search for similar items in EconPapers)
JEL-codes: C32 C51 E52 (search for similar items in EconPapers)
Date: 2010-03
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Citations: View citations in EconPapers (69)

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Related works:
Journal Article: Factor-GMM estimation with large sets of possibly weak instruments (2010)
Working Paper: Factor-GMM Estimation with Large Sets of Possibly Weak Instruments (2006)
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