The present paper suggests a new way to carry out IV estimation with many instruments. Our suggestion is to cross-sectionally average the instruments and use these averages as instruments. We provide a theoretical and Monte Carlo analysis of this approach.
Cross-sectional Averaging and Instrumental Variable Estimation with Many Weak Instruments
MARCELLINO, MASSIMILIANO;
2010
Abstract
The present paper suggests a new way to carry out IV estimation with many instruments. Our suggestion is to cross-sectionally average the instruments and use these averages as instruments. We provide a theoretical and Monte Carlo analysis of this approach.
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