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Parameter orthogonalization and Bayesian inference with many instruments

It is examined how Bayesian inference might proceed in models with many instruments. A new prior specification based on Lancaster's (1997) parameter orthogonalization is developed. This orthogonalization is shown to guarantee that the statistical problems associated with the first stage coefficients are not carried over in estimating the parameter of interest.
Year of publication:
2011
Authors: Hahn, Jinyong ; Hansen, Karsten
Published in:
Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 112.2011, 2, p. 207-209
Publisher: Elsevier
Subject: Orthogonalization LIML Many instruments
Type of publication: Article
Source:
Persistent link: https://www.econbiz.de/10009146157
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