Instrumental Variables Estimation in Large Heterogeneous Panels with Multifactor Structure

Giovanni Forchini, Jiang Bin and Peng Bin
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Jiang Bin: Department of Econometrics and Business Statistics, Monash University, Australia
Peng Bin: Department of Economics, University of Bath, UK

Journal of Econometric Methods, 2020, vol. 9, issue 1, 22

Abstract: The paper proposes new instrumental variables estimators for the slope parameters of a panel data model with classical endogeneity in which all the observables – including the instruments – may have a common factors structure. These estimators are shown to be consistent and asymptotically normal under weak regularity conditions. A small Monte Carlo simulation shows that these estimators compare favourably to existing estimators.

Keywords: common correlated effects estimator; common correlated effects mean group estimator; endogeneity; heterogeneous panels; instrumental variables estimator; multifactor structure (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1515/jem-2018-0003

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