Using Invalid Instruments on Purpose: Focused Moment Selection and Averaging for GMM

Abstract

In finite samples, the use of an invalid but highly relevant instrument can substantially improve inference. Building on this idea, I propose a moment selection criterion for GMM in which over-identifying restrictions are chosen based on the mean-squared error of the estimators they produce rather than their validity: the Focused Moment Selection Criterion… (More)

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Cite this paper

@inproceedings{DiTraglia2011UsingII, title={Using Invalid Instruments on Purpose: Focused Moment Selection and Averaging for GMM}, author={Francis J. DiTraglia and Richard J. Smith and Gerda Claeskens and Toru Kitagawa}, year={2011} }