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OPTIMAL INFERENCE WITH MANY INSTRUMENTS

Published online by Cambridge University Press:  06 March 2002

Jinyong Hahn
Jinyong Hahn
Affiliation:
Brown University
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Abstract

In this paper, I derive the efficiency bound of the structural parameter in a linear simultaneous equations model with many instruments. The bound is derived by applying a convolution theorem to Bekker's (1994, Econometrica 62, 657–681) asymptotic approximation, where the number of instruments grows to infinity at the same rate as the sample size. Usual instrumental variables estimators with a small number of instruments are heuristically argued to be efficient estimators in the sense that their asymptotic distribution is minimal. Bayesian estimators based on parameter orthogonalization are heuristically argued to be inefficient.

Type
Research Article
Information
Econometric Theory , Volume 18 , Issue 1 , February 2002 , pp. 140 - 168
Copyright
© 2002 Cambridge University Press

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