NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Instrumental Variables Estimation of Heteroskedastic Linear Models Using All Lags of Instruments

Kenneth D. West, Ka-fu Wong, Stanislav Anatolyev

NBER Technical Working Paper No. 338
Issued in May 2007
NBER Program(s):   TWP

We propose and evaluate a technique for instrumental variables estimation of linear models with conditional heteroskedasticity. The technique uses approximating parametric models for the projection of right hand side variables onto the instrument space, and for conditional heteroskedasticity and serial correlation of the disturbance. Use of parametric models allows one to exploit information in all lags of instruments, unconstrained by degrees of freedom limitations. Analytical calculations and simulations indicate that there sometimes are large asymptotic and finite sample efficiency gains relative to conventional estimators (Hansen (1982)), and modest gains or losses depending on data generating process and sample size relative to quasi-maximum likelihood. These results are robust to minor misspecification of the parametric models used by our estimator.

download in pdf format
   (304 K)

email paper

This paper is available as PDF (304 K) or via email.

A data appendix is available at http://www.nber.org/data-appendix/t0338

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/t0338

Published: "Instrumental Variables Estimation of Heteroskedastic Linear Models Using All Lags of Instruments,” (with Ka-fu Wong and Stanislav Anatolyev), Econometric Reviews 28 (5) (2009), 441-467.

Users who downloaded this paper also downloaded these:
Hausman Full Information Instrumental Variables Estimation of Simultaneous Equations Systems
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us