The Amiti-Weinstein estimator: An equivalence result

- Amiti and Weinstein (2013) propose a framework to estimate bank supply shocks.
- We prove equivalence of the proposed estimator with weighted least squares (WLS).
- The proof relies on the Frisch and Waugh theorem.
- This insight is useful as most statistical software packages have a WLS routine.
- We argue that the estimator can be used in other research venues as well.

Amiti and Weinstein (2013) develop a new methodology to identify bank-supply shocks using matched bank-firm credit data. We show, using the Frisch-Waugh theorem, that their methodology is equivalent to a weighted least squares regression and suggest applicability in other research areas.