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On adding over-identifying instrumental variables to simultaneous equations

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  • Hendry, David F.

Abstract

Reducing the number of over-identifying instruments, or adding them to a structural equation, increases estimation dispersion. Added instruments should be insignificant under correct specification, with parameter estimates nearly unaffected, confirmed by Monte Carlo. Selecting instruments does not affect these results.

Suggested Citation

  • Hendry, David F., 2011. "On adding over-identifying instrumental variables to simultaneous equations," Economics Letters, Elsevier, vol. 111(1), pages 68-70, April.
    • Handle: RePEc:eee:ecolet:v:111:y:2011:i:1:p:68-70
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    References listed on IDEAS

    as
    1. Engle, Robert F. & Hendry, David F., 1993. "Testing superexogeneity and invariance in regression models," Journal of Econometrics, Elsevier, vol. 56(1-2), pages 119-139, March.
    2. David Hendry & Jennifer L. Castle & Jurgen A. Doornik, 2010. "Testing the Invariance of Expectations Models of Inflation," Economics Series Working Papers 510, University of Oxford, Department of Economics.
    3. David Hendry & Carlos Santos, 2010. "An Automatic Test of Super Exogeneity," Economics Series Working Papers 476, University of Oxford, Department of Economics.
    4. Carlos Santos & David Hendry & Soren Johansen, 2008. "Automatic selection of indicators in a fully saturated regression," Computational Statistics, Springer, vol. 23(2), pages 317-335, April.
    5. Søren Johansen & Bent Nielsen, 2008. "An analysis of the indicator saturation estimator as a robust regression," Discussion Papers 08-03, University of Copenhagen. Department of Economics.
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    Cited by:

    1. Jennifer L. Castle & Jurgen A. Doornik & David F. Hendry & Ragnar Nymoen, 2014. "Misspecification Testing: Non-Invariance of Expectations Models of Inflation," Econometric Reviews, Taylor & Francis Journals, vol. 33(5-6), pages 553-574, August.
    2. Kiviet Jan F., 2017. "Discriminating between (in)valid External Instruments and (in)valid Exclusion Restrictions," Journal of Econometric Methods, De Gruyter, vol. 6(1), pages 1-9, January.
    3. David F. Hendry & Søren Johansen, 2011. "The Properties of Model Selection when Retaining Theory Variables," Discussion Papers 11-25, University of Copenhagen. Department of Economics.
    4. Hendry, David F. & Johansen, Søren, 2015. "Model Discovery And Trygve Haavelmo’S Legacy," Econometric Theory, Cambridge University Press, vol. 31(1), pages 93-114, February.

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