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Instrument Relevance in Multivariate Linear Models: A Simple Measure

John Shea ()

No 193, NBER Technical Working Papers from National Bureau of Economic Research, Inc

Abstract: The correlation between instruments and explanatory variables is a key determinant of the performance of the instrumental variables estimator. The R-squared from regressing the explanatory variable on the instrument vector is a useful measure of relevance in univariate models, but can be misleading when there are multiple endogenous variables. This paper proposes a computationally simple partial R- squared measure of instrument relevance for multivariate models.

JEL-codes: C20 C30 (search for similar items in EconPapers)
Date: 1996-03
Note: ME
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Published as Review of Economics and Statistics, Vol. 79, no. 2 (May 1997): 348-352.

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