Panopoulou, Dr. Ekaterini and Kourogenis, Nicolaos and Pittis, Nikitas
Irrelevant but highly persistent instruments in stationary regressions with endogenous varables containing near-to-unit roots.
This paper suggests that IV estimators, utilizing irrelevant but persistent instruments may produc reliable inferences, in small samples, in cases where the endogenous variables contain autoregressive roots near unity. In such cases, these estimators appear to outperform IV estimators with strong instruments as will as some asymptotically efficent cointegration estimators.
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