YET MORE ON THE EXACT PROPERTIES OF IV ESTIMATORS

Grant H. Hillier

Econometric Theory, 2006, vol. 22, issue 05, pages 913-931

Abstract: We revisit the exact properties of two-stage least squares and limited information maximum likelihood estimators in a structural equation instrumental variables regression under Gaussian assumptions. Simple derivations based on conditioning serve both to demystify the apparently complicated formulas, and to isolate the key quantities that determine the properties of the estimators. Some recent results obtained under weak-instrument asymptotics are sharpened and clarified by the exact analysis.Thanks to Peter Phillips and several anonymous referees for helpful comments that improved the paper considerably.

Date: 2006
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