The validity of instruments revisited
This paper shows how valid inferences can be made when an instrumental variable does not perfectly satisfy the orthogonality condition. When there is a mild violation of the orthogonality condition, the Anderson and Rubin (1949) test is oversized. In order to correct this problem, the fractionally resampled Anderson–Rubin test is derived by modifying Wu’s (1990) resampling technique. We select half of the sample when resampling and obtain valid but conservative critical values. Simulations show that our technique performs well even with moderate to large violation of exogeneity when there is a finite sample correction for the block size choice.
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- Andrews, Donald W.K. & Guggenberger, Patrik, 2009.
"Validity Of Subsampling And “Plug-In Asymptotic” Inference For Parameters Defined By Moment Inequalities,"
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- Daniel Berkowitz & Mehmet Caner & Ying Fang, 2013. "Are "Nearly Exogenous" Instruments Reliable?," WISE Working Papers 2013-10-14, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
- Daniel Berkowitz & Mehmet Caner* & Ying Fang, 2013. "Are Nearly “Exogenous Instruments” Reliable?," WISE Working Papers 2013-10-14, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
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- Patrik Buggenberger & Richard Smith, 2003. "Generalized empirical likelihood estimators and tests under partial, weak and strong identification," CeMMAP working papers CWP08/03, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
- Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2008. "Income and Democracy," American Economic Review, American Economic Association, vol. 98(3), pages 808-842, June.
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- Acemoglu, Daron & Johnson, Simon & Robinson, James A & Yared, Pierre, 2005. "Income and Democracy," CEPR Discussion Papers 5273, C.E.P.R. Discussion Papers.
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- Hall, Alastair R. & Inoue, Atsushi, 2003. "The large sample behaviour of the generalized method of moments estimator in misspecified models," Journal of Econometrics, Elsevier, vol. 114(2), pages 361-394, June.
- Alastair R. Hall & Atsushi Inoue, 2005. "The Large Sample Behaviour of the Generalized Method of Moments Estimator in Misspecified Models," Econometrics 0505002, EconWPA.
- Andrews, Donald W.K. & Guggenberger, Patrik, 2010. "ASYMPTOTIC SIZE AND A PROBLEM WITH SUBSAMPLING AND WITH THE m OUT OF n BOOTSTRAP," Econometric Theory, Cambridge University Press, vol. 26(02), pages 426-468, April.
- K. Newey, Whitney, 1985. "Generalized method of moments specification testing," Journal of Econometrics, Elsevier, vol. 29(3), pages 229-256, September.
- Frank Kleibergen, 2002. "Pivotal Statistics for Testing Structural Parameters in Instrumental Variables Regression," Econometrica, Econometric Society, vol. 70(5), pages 1781-1803, September.
- James H. Stock & Jonathan Wright, 2000. "GMM with Weak Identification," Econometrica, Econometric Society, vol. 68(5), pages 1055-1096, September. Full references (including those not matched with items on IDEAS)
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