Instrument Relevance in Multivariate Linear Models: A Simple Measure
NBER Technical Working Paper No. 193
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.
Published: Review of Economics and Statistics, Vol. 79, no. 2 (May 1997): 348-352.