Publication Type

Journal Article

Publication Date

3-2017

Abstract

This paper develops exact finite sample and asymptotic distributions for a class of reduced form estimators and predictors, allowing for the presence of unidentified or weakly identified structural equations. Weak instrument asymptotic theory is developed directly from finite sample results, unifying earlier findings and showing the usefulness of structural information in making predictions from reduced form systems in applications. Asymptotic results are reported for predictions from models with many weak instruments. Of particular interest is the finding that, in unidentified and weakly identified structural models, partially restricted reduced form predictors have considerably smaller forecast mean square errors than unrestricted reduced forms. These results are related to the use of shrinkage methods in system-wide reduced form estimation.

Keywords

Endogeneity, exact distribution, finite sample theory, moment existence, partial identification, reduced form, structural equation, unidentified structure, weak instrument

Discipline

Econometrics | Economic Theory

Research Areas

Econometrics

Publication

Econometric Reviews

Volume

36

Issue

6-9

First Page

818

Last Page

839

ISSN

0747-4938

Identifier

10.1080/07474938.2017.1307578

Publisher

Taylor & Francis: STM, Behavioural Science and Public Health Titles

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org./10.1080/07474938.2017.1307578

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