Weak Instruments in Panel Data Models

Chihwa Kao and Long Liu

Chapter 4 in High-Dimensional Econometrics and Identification, 2019, pp 109-127 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The issues of weak IV have attracted considerable attention; see Stock, Wright, and Yogo (2002) for a survey. This chapter is based on Baltagi, Kao, and Liu (2012). It is known that when IVs are weak, the 2SLS estimator is inconsistent, as we will explain in Sec. 4.1. However, in the panel data model with both large n and T, we show that the 2SLS is consistent. Hence the large panel model with weak IV is identifiable…

Keywords: Large Dimensional; Large Panel; Identification; High-Dimensional Econometrics; Econometrics; Statistics; True Signal; High-Dimensional Data; Panel Data Model; Panel Data; Panel Spurious Regressions; Autocorrelation Parameter; Dynamic Linear Panels; Incidental Parameters (search for similar items in EconPapers)
JEL-codes: C01 C1 (search for similar items in EconPapers)
Date: 2019
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