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Irrelevant but highly persistent instruments in stationary regressions with endogenous variables containing near-to-unit roots

Ekaterini Panopoulou (), Nikolaos Kourogenis () and Nikitas Pittis

Economics, Finance and Accounting Department Working Paper Series from Department of Economics, Finance and Accounting, National University of Ireland - Maynooth

Abstract: This paper suggests that IV estimators, utilizing irrelevant but persistent instruments mai produce reliable inferences, in small samples, in cases where the endogenous variables contaii autoregressive roots near unity. In such cases, these estimators appear to outperform IV estimator: with strong instruments as well as some asymptotically efficient cointegration estimators.

Keywords: Instrumental variables estimator; persistent instruments; near-to-unit roots. (search for similar items in EconPapers)
JEL-codes: C12 C13 C22 (search for similar items in EconPapers)
Date: 2006
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