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Spurious Instrumental Variables

Daniel Ventosa-Santaulària ()

MPRA Paper from University Library of Munich, Germany

Abstract: Spurious regression phenomenon has been recognized for a wide range of Data Generating Processes: driftless unit roots, unit roots with drift, long memory, trend and broken-trend stationarity, etc. The usual framework is Ordinary Least Squares. We show that the spurious phenomenon also occurs in Instrumental Variables estimation when using non-stationary variables, whether the non-stationarity component is stochastic or deterministic. Finite sample evidence supports the asymptotic results.

Keywords: IV Estimator; Spurious Regression; Broken-Trend stationarity; Unit Root. (search for similar items in EconPapers)
JEL-codes: C12 C13 C22 (search for similar items in EconPapers)
Date: 2008
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https://mpra.ub.uni-muenchen.de/59005/1/MPRA_paper_59005.pdf original version (application/pdf)

Related works:
Working Paper: Spurious Instrumental Variables (2009) Downloads
Working Paper: Spurious Instrumental Variables (2007) Downloads
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