A REMARK ON BIMODALITY AND WEAK INSTRUMENTATION IN STRUCTURAL EQUATION ESTIMATION

@article{Phillips2006ARO,
  title={A REMARK ON BIMODALITY AND WEAK INSTRUMENTATION IN STRUCTURAL EQUATION ESTIMATION},
  author={Peter C. B. Phillips},
  journal={Econometric Theory},
  year={2006},
  volume={22},
  pages={947 - 960}
}
In a simple model composed of a structural equation and identity, the finite-sample distribution of the instrumental variable/limited information maximum likelihood (IV/LIML) estimator is always bimodal, and this is most apparent when the concentration parameter is small. Weak instrumentation is the energy that feeds the secondary mode, and the coefficient in the structural identity provides a point of compression in the density that gives rise to it. The IV limit distribution can be normal… Expand
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