A solution to the weak instrument bias in 2SLS estimation: Indirect inference with stochastic approximation

Vincent Arel-Bundock

Economics Letters, 2013, vol. 120, issue 3, 495-498

Abstract: This paper frames indirect inference bias correction as a stochastic root-finding problem and proposes a computationally efficient method to solve it. The technique is applied to the many/weak instrument bias in two-stage least squares estimation. Monte Carlo experiments suggest that the bias-corrected estimator outperforms more common alternatives.

Keywords: Weak instrument bias; Two-stage least squares; Indirect inference; Stochastic approximation; Bias correction (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:120:y:2013:i:3:p:495-498

DOI: 10.1016/j.econlet.2013.06.004

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