t-Tests in a Structural Equation with Many Instruments
AbstractThis paper studies the properties of t-ratios associated with the limited information maximum likelihood (LIML) estimators in a structural form estimation when the number of instrumental variables is large. Asymptotic expansions are made of the distributions of a large K t-ratio statistic under large-Kn asymptotics. A modified t-ratio statistic is proposed from the asymptotic expansion. The power of the large K t-ratio test dominates the AR test, the K-test by Kleibergen (2002), and the conditional LR test by Moreira (2003); and the difference can be substantial when the instruments are weak.
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Bibliographic InfoPaper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-467.
Length: 36 pages
Date of creation: Feb 2007
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