Journal article
OLS and IV estimation of regression models including endogenous interaction terms
Econometric reviews, v 38(7), pp 814-827
09 Aug 2019
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
We analyze a class of linear regression models including interactions of endogenous regressors and exogenous covariates. We show how to generate instrumental variables using the nonlinear functional form of the structural equation when traditional excluded instruments are unknown. We propose to use these instruments with identification robust IV inference. We furthermore show that, whenever functional form identification is not valid, the ordinary least squares (OLS) estimator of the coefficient of the interaction term is consistent and standard OLS inference applies. Using our alternative empirical methods we confirm recent empirical findings on the nonlinear causal relation between financial development and economic growth.
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Details
- Title
- OLS and IV estimation of regression models including endogenous interaction terms
- Creators
- Maurice J. G. Bun - University of AmsterdamTeresa D. Harrison - Drexel University
- Publication Details
- Econometric reviews, v 38(7), pp 814-827
- Publisher
- Taylor & Francis
- Number of pages
- 14
- Grant note
- 016.115.320 / NWO Vernieuwingsimpuls research grant
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000472105300005
- Scopus ID
- 2-s2.0-85043341434
- Other Identifier
- 991019167662604721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Economics
- Mathematics, Interdisciplinary Applications
- Social Sciences, Mathematical Methods
- Statistics & Probability