Econometrica: Jan 1971, Volume 39, Issue 1

A General Approximation to the Distribution of Instrumental Variables Estimates

https://doi.org/0012-9682(197101)39:1<131:AGATTD>2.0.CO;2-2
p. 131-169

J. D. Sargan, W. M. Mikhail

This paper develops approximations of the Gram-Charlier type to the cumulative distribution function of the instrumental variables estimator on classical assumptions. In the special case where there are only two endogenous variables in the estimated equation, exact values of the cumulative distribution function are computed by numerical integration and compared with the approximations. Although the error in the approximation depends critically on the parameters of the stochastic model, the approximation is good for the special case even for small sample size over a wide range of values of the parameters.

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