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Are "Nearly Exogenous Instruments" reliable?

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  • Berkowitz, Daniel
  • Caner, Mehmet
  • Fang, Ying

Abstract

We show that when instruments are nearly exogenous, the two stage least squares t-statistic unpredictably over-rejects or under-rejects the null hypothesis that the endogenous regressor is insignificant and Anderson-Rubin test over-rejects the null. We prove that in the limit these tests are no longer nuisance parameter free.

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File URL: http://www.sciencedirect.com/science/article/B6V84-4S7JFT8-6/2/5f39589d5235aa33132b2f98cc02072a
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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 101 (2008)
Issue (Month): 1 (October)
Pages: 20-23

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Handle: RePEc:eee:ecolet:v:101:y:2008:i:1:p:20-23

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Web page: http://www.elsevier.com/locate/ecolet

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Keywords: C30 Valid instruments Weak identification Inference;

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Citations

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Cited by:
  1. repec:wyi:journl:002137 is not listed on IDEAS
  2. Kraay, Aart, 2008. "Instrumental variables regressions with honestly uncertain exclusion restrictions," Policy Research Working Paper Series 4632, The World Bank.
  3. Cai, Zongwu & Fang, Ying & Su, Jia, 2012. "Reducing asymptotic bias of weak instrumental estimation using independently repeated cross-sectional information," Statistics & Probability Letters, Elsevier, vol. 82(1), pages 180-185.
  4. Berkowitz, Daniel & Caner, Mehmet & Fang, Ying, 2012. "The validity of instruments revisited," Journal of Econometrics, Elsevier, vol. 166(2), pages 255-266.
  5. repec:wyi:journl:002149 is not listed on IDEAS
  6. David N. DeJong & Daniel Berkowitz, 2008. "Growth in Post-Soviet Russia: A Tale of Two Transitions," Working Papers 369, University of Pittsburgh, Department of Economics, revised Sep 2008.
  7. Lee, Seojeong, 2014. "Asymptotic refinements of a misspecification-robust bootstrap for generalized method of moments estimators," Journal of Econometrics, Elsevier, vol. 178(P3), pages 398-413.
  8. Doko Tchatoka, Firmin, 2012. "Specification tests with weak and invalid instruments," Working Papers 15063, University of Tasmania, School of Economics and Finance, revised 26 Jun 2012.
  9. Jan F. KIVIET & Jerzy NIEMCZYK, 2013. "On the limiting and empirical distributions of IV estimators when some of the instruments are actually endogenous," Economic Growth centre Working Paper Series 1311, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre.
  10. Michal Kolesár & Raj Chetty & John N. Friedman & Edward L. Glaeser & Guido W. Imbens, 2011. "Identification and Inference with Many Invalid Instruments," NBER Working Papers 17519, National Bureau of Economic Research, Inc.
  11. Dang, Duc Anh, 2013. "How foreign direct investment promote institutional quality: Evidence from Vietnam," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1054-1072.
  12. repec:wyi:journl:002148 is not listed on IDEAS

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