Version 1
: Received: 23 September 2024 / Approved: 23 September 2024 / Online: 23 September 2024 (15:12:25 CEST)
How to cite:
Herce Postigo, Á.; Salvador, M. Instrument Selection in Panel Data Models with Endogeneity: A Bayesian Approach. Preprints2024, 2024091805. https://doi.org/10.20944/preprints202409.1805.v1
Herce Postigo, Á.; Salvador, M. Instrument Selection in Panel Data Models with Endogeneity: A Bayesian Approach. Preprints 2024, 2024091805. https://doi.org/10.20944/preprints202409.1805.v1
Herce Postigo, Á.; Salvador, M. Instrument Selection in Panel Data Models with Endogeneity: A Bayesian Approach. Preprints2024, 2024091805. https://doi.org/10.20944/preprints202409.1805.v1
APA Style
Herce Postigo, Á., & Salvador, M. (2024). Instrument Selection in Panel Data Models with Endogeneity: A Bayesian Approach. Preprints. https://doi.org/10.20944/preprints202409.1805.v1
Chicago/Turabian Style
Herce Postigo, Á. and Manuel Salvador. 2024 "Instrument Selection in Panel Data Models with Endogeneity: A Bayesian Approach" Preprints. https://doi.org/10.20944/preprints202409.1805.v1
Abstract
This paper proposes the use of Bayesian inference techniques to search for and obtain valid instruments in dynamic panel data models where endogenous variables may exist. The use of Principal Component Analysis (PCA) allows for obtaining a reduced number of instruments in comparison to the high number of instruments commonly used in the literature, and Monte Carlo Markov Chain (MCMC) methods enable efficient exploration of the instrument space, deriving accurate point estimates of the elements of interest. The proposed methodology is illustrated in a simulated case and in an empirical application, where the partial effect of a series of determinants on the attraction of international bank flows is quantified. The results highlight the importance of promoting and developing the private sector in these economies, as well as the importance of maintaining good levels of credit worthiness.
Keywords
endogeneity; bayesian methods; MCMC; instrumental variables selection; international bank flows
Subject
Business, Economics and Management, Econometrics and Statistics
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
