The Zero-Information-Limit-Condition and Spurious Inference in Weakly Identified Models
AbstractThe fact that weak instruments lead to spurious inference is now widely recognized. In this paper we ask whether spurious inference occurs more generally in weakly identified models. To distinguish between models where spurious inference will occur from those where it does not, we introduce the Zero-Information-Limit-Condition (ZILC). When ZILC holds, the information or precision of parameter estimates is overestimated. We discuss how ZILC applies to models encountered in practice and show that spurious inference does occur when ZILC holds.
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Bibliographic InfoPaper provided by University of Washington, Department of Economics in its series Working Papers with number UWEC-2006-07-P.
Date of creation: May 2007
Date of revision:
Publication status: Published in Journal of Econometrics, Volume Vol. 138, 47-62.
Other versions of this item:
- Nelson, Charles R. & Startz, Richard, 2007. "The zero-information-limit condition and spurious inference in weakly identified models," Journal of Econometrics, Elsevier, vol. 138(1), pages 47-62, May.
- Charles Nelson & Richard Startz, 2004. "The Zero-Information-Limit Condition and Spurious Inference in Weakly Identified Models," Working Papers UWEC-2004-03-FC, University of Washington, Department of Economics.
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