The behaviour of inconsistent instrumental variables estimators in dynamic systems with autocorrelated errors

摘要: Abstract To appropriately interpret time-series evidence when empirical relationships are incorrectly formulated, a general mis-specification framework is required. A linear, stationary, dynamic, simultaneous system with autoregressive errors postulated to investigate instrumental variables ables estimators the instruments unknowingly correlated equation errors. The approach uses control variates (Hendry and Harrison, Journal of Econometrics, July 1974) develop asymptotic distributions exact moments for approximations econometric estimators. accuracy results finite sample corroborated by simulation. analysis highlights need care in interpreting estimated equations tests predictive failure.