Deriving Bounds on the Structural Vector when the Measurement Errors are Correlated: An Elaboration of the Frisch/Reiersol Approach

Abstract

In the general linear errors-in-variables model the main results have been derived under the assuption that the measurement errors are uncorrelated. However, as recognized by Bekker, Kapteyn and Wansbeek (BKW) (1997) and Lach (1993) this is often a problematic assumption to maintain in empirical applications since quite trivial variable transformations will often create correlation between the errors.ECONOMETRICS ; MODELS ; MEASUREMENT