Advanced Search
MyIDEAS: Login to save this paper or follow this series

Bootstrap and Higher-Order Expansion Validity When Instruments May Be Weak

Contents:

Author Info

  • Marcelo J. Moreira
  • Jack R. Porter
  • Gustavo A. Suarez

Abstract

It is well-known that size-adjustments based on Edgeworth expansions for the t-statistic perform poorly when instruments are weakly correlated with the endogenous explanatory variable. This paper shows, however, that the lack of Edgeworth expansions and bootstrap validity are not tied to the weak instrument framework, but instead depends on which test statistic is examined. In particular, Edgeworth expansions are valid for the score and conditional likelihood ratio approaches, even when the instruments are uncorrelated with the endogenous explanatory variable. Furthermore, there is a belief that the bootstrap method fails when instruments are weak, since it replaces parameters with inconsistent estimators. Contrary to this notion, we provide a theoretical proof that guarantees the validity of the bootstrap for the score test, as well as the validity of the conditional bootstrap for many conditional tests. Monte Carlo simulations show that the bootstrap actually decreases size distortions in both cases.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/t0302.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0302.

as in new window
Length:
Date of creation: Nov 2004
Date of revision:
Handle: RePEc:nbr:nberte:0302

Note: TWP
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Nelson, C. & Startz, R., 1988. "Some Furthere Results On The Exact Small Sample Properties Of The Instrumental Variable Estimator," Working Papers 88-06, University of Washington, Department of Economics.
  2. Guggenberger, Patrik & Smith, Richard J., 2005. "Generalized Empirical Likelihood Estimators And Tests Under Partial, Weak, And Strong Identification," Econometric Theory, Cambridge University Press, vol. 21(04), pages 667-709, August.
  3. Donald W. K. Andrews, 2000. "Inconsistency of the Bootstrap when a Parameter Is on the Boundary of the Parameter Space," Econometrica, Econometric Society, vol. 68(2), pages 399-406, March.
  4. Qumsiyeh, Maher B., 1990. "Edgeworth expansion in regression models," Journal of Multivariate Analysis, Elsevier, vol. 35(1), pages 86-101, October.
  5. Frank Kleibergen, 2004. "Expansions of GMM statistics that indicate their properties under weak and/or many instruments and the bootstrap," Econometric Society 2004 North American Summer Meetings 408, Econometric Society.
  6. Atsushi Inoue, 2006. "A bootstrap approach to moment selection," Econometrics Journal, Royal Economic Society, vol. 9(1), pages 48-75, 03.
  7. Phillips, Peter C B, 1977. "A General Theorem in the Theory of Asymptotic Expansions as Approximations to the Finite Sample Distributions of Econometric Estimators," Econometrica, Econometric Society, vol. 45(6), pages 1517-34, September.
  8. Frank Kleibergen, 2002. "Pivotal Statistics for Testing Structural Parameters in Instrumental Variables Regression," Econometrica, Econometric Society, vol. 70(5), pages 1781-1803, September.
  9. Moreira, Marcelo J., 2009. "Tests with correct size when instruments can be arbitrarily weak," Journal of Econometrics, Elsevier, vol. 152(2), pages 131-140, October.
  10. Jinyong Hahn & Jerry Hausman & Guido Kuersteiner, 2004. "Estimation with weak instruments: Accuracy of higher-order bias and MSE approximations," Econometrics Journal, Royal Economic Society, vol. 7(1), pages 272-306, 06.
  11. Horowitz, Joel L., 2001. "The Bootstrap," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 52, pages 3159-3228 Elsevier.
  12. Sargan, J D, 1976. "Econometric Estimators and the Edgeworth Approximation," Econometrica, Econometric Society, vol. 44(3), pages 421-48, May.
  13. Donald W.K. Andrews & Marcelo J. Moreira & James H. Stock, 2004. "Optimal Invariant Similar Tests for Instrumental Variables Regression," Cowles Foundation Discussion Papers 1476, Cowles Foundation for Research in Economics, Yale University.
  14. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  15. James H. Stock & Jonathan Wright, 2000. "GMM with Weak Identification," Econometrica, Econometric Society, vol. 68(5), pages 1055-1096, September.
  16. Jean-Marie Dufour, 1997. "Some Impossibility Theorems in Econometrics with Applications to Structural and Dynamic Models," Econometrica, Econometric Society, vol. 65(6), pages 1365-1388, November.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Angelica Gonzalez, 2007. "Empirical Likelihood Estimation in Dynamic Panel Models," ESE Discussion Papers 168, Edinburgh School of Economics, University of Edinburgh.
  2. Russell Davidson & James G. MacKinnon, 2008. "Bootstrap inference in a linear equation estimated by instrumental variables," Econometrics Journal, Royal Economic Society, vol. 11(3), pages 443-477, November.
  3. Russell Davidson & James Mackinnon, 2009. "Wild bootstrap tests for IV regression," Working Papers halshs-00443550, HAL.
  4. Moreira, Marcelo J. & Porter, Jack R. & Suarez, Gustavo A., 2009. "Bootstrap validity for the score test when instruments may be weak," Journal of Econometrics, Elsevier, vol. 149(1), pages 52-64, April.
  5. Guggenberger, Patrik & Smith, Richard J., 2008. "Generalized empirical likelihood tests in time series models with potential identification failure," Journal of Econometrics, Elsevier, vol. 142(1), pages 134-161, January.
  6. Donald W.K. Andrews & James H. Stock, 2005. "Inference with Weak Instruments," Cowles Foundation Discussion Papers 1530, Cowles Foundation for Research in Economics, Yale University.
  7. Russell Davidson & James G. MacKinnon, 2012. "Bootstrap Confidence Sets with Weak Instruments," Working Papers 1278, Queen's University, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberte:0302. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.