Journal
JOURNAL OF ECONOMETRICS
Volume 214, Issue 2-3, Pages 413-432Publisher
ELSEVIER SCIENCE SA
DOI: 10.1016/j.jeconom.2019.08.001
Keywords
Cash flow; Measurement error; Multiple equations; Partial identification; Sensitivity analysis; Tobin's q
Categories
Funding
- Bankard Fund for Political Economy
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We characterize the sharp identification regions for the coefficients in a system of linear equations that share an explanatory variable measured with classical error. We demonstrate the identification gain from analyzing the equations jointly. We derive the sharp identification regions under any configuration of three auxiliary assumptions. These restrict the noise-to-signal ratio, the coefficients of determination, and the signs of the correlations among the cross-equation disturbances. For inference, we implement results on intersection bounds. The application studies the effects of cash flow on the investment, saving, and debt of firms when Tobin's q serves as a proxy for marginal q. (C) 2019 Elsevier B.V. All rights reserved.
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