Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 03/2004: Exact Small Sample Properties of the Instrumental Variable Estimator. A View From a Different Angle.

Halvor Mehlum ()
Additional contact information
Halvor Mehlum: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway

Abstract: I derive the exact small sample properties of the instrumental variables estimator using a trigonometric approach. The distribution for the estimation error is decomposed into a product of three components - each with an intuitive interpretation. This approach helps the discussion on what underlies the exact shape of the estimator’s distribution and in particular the possibility of a bimodal distribution.

Keywords: Instrument; variable; estimator

JEL-codes: C30

14 pages, February 4, 2004

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