Instrument Relevance in Linear Models: a Simple Measure
John Shea
,
2
(
79
)
Review of Economics and Statistics
348-352
May
1997
Abstract
The correlation between instruments and explanatory variables is a key determinant of the performance of the instrumental variables estimator. The R2 from regressing the explanatory variable on the instrument vector is a useful measure of relevance in univariate models, but can be misleading when there are multiple endogenous variables. This note proposes a computationally simple partial R2 measure of instrument relevance for multivariate models.