Bootstrap-based Selection for Instrumental Variables Model

Wenjie Wang and Qingfeng Liu ()

Economics Bulletin, 2015, vol. 35, issue 3, 1886-1896

Abstract: This paper develops bootstrap-based method for addressing the “many instruments†problem in the context of instrumental variable estimation. We propose a plug-in restricted-efficient-residual-based (plug-in RE) bootstrap for choosing optimal number of instruments used for two-stage least squares (TSLS) and limited information maximum likelihood (LIML) estimator. In Monte Carlo experiments, we find that the instrument choice based on our plug-in RE bootstrap generally yields an improvement in finite sample performance.

Keywords: Instrument selection; Many instruments; Bootstrap; TSLS; LIML (search for similar items in EconPapers)
JEL-codes: C1 C2 (search for similar items in EconPapers)
Date: 2015-09-07
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