Instrumental variables estimation in large heterogeneous panels with multifactor structure

Giovanni Forchini, Bin Jiang, Bin Peng

Research output: Contribution to journalArticleResearchpeer-review

Abstract

The paper proposes new instrumental variables estimators for the slope parameters of a panel data model with classical endogeneity in which all the observables-including the instruments-may have a common factors structure. These estimators are shown to be consistent and asymptotically normal under weak regularity conditions. A small Monte Carlo simulation shows that these estimators compare favourably to existing estimators.

Original languageEnglish
Article number20180003
Number of pages22
JournalJournal of Econometric Methods
Volume9
Issue number1
DOIs
Publication statusPublished - 2020

Keywords

  • common correlated effects estimator
  • common correlated effects mean group estimator
  • endogeneity
  • heterogeneous panels
  • instrumental variables estimator
  • multifactor structure

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