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A Robust Test for Weak Instruments

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  • José Luis Montiel Olea
  • Carolin Pflueger

Abstract

We develop a test for weak instruments in linear instrumental variables regression that is robust to heteroscedasticity, autocorrelation, and clustering. Our test statistic is a scaled nonrobust first-stage F statistic. Instruments are considered weak when the two-stage least squares or the limited information maximum likelihood Nagar bias is large relative to a benchmark. We apply our procedures to the estimation of the elasticity of intertemporal substitution, where our test cannot reject the null of weak instruments in a larger number of countries than the test proposed by Stock and Yogo in 2005. Supplementary materials for this article are available online.

Suggested Citation

  • José Luis Montiel Olea & Carolin Pflueger, 2013. "A Robust Test for Weak Instruments," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 31(3), pages 358-369, July.
  • Handle: RePEc:taf:jnlbes:v:31:y:2013:i:3:p:358-369
    DOI: 10.1080/00401706.2013.806694
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    Citations

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    Cited by:

    1. Sanderson, Eleanor & Windmeijer, Frank, 2016. "A weak instrument F-test in linear IV models with multiple endogenous variables," Journal of Econometrics, Elsevier, vol. 190(2), pages 212-221.
    2. Enikolopov, Ruben & Makarin, Alexey & Petrova, Maria, 2016. "Social Media and Protest Participation: Evidence from Russia," CEPR Discussion Papers 11254, C.E.P.R. Discussion Papers.
    3. Giannetti, Caterina, 2015. "Debt Concentration of European Firms," SEP Working Papers 2015/3, LUISS School of European Political Economy.
    4. Ramey, V.A., 2016. "Macroeconomic Shocks and Their Propagation," Handbook of Macroeconomics, Elsevier.
    5. Sophocles Mavroeidis & Mikkel Plagborg-Møller & James H. Stock, 2014. "Empirical Evidence on Inflation Expectations in the New Keynesian Phillips Curve," Journal of Economic Literature, American Economic Association, vol. 52(1), pages 124-188, March.
    6. Anyck Dauphin & Bernard Fortin & Guy Lacroix, 2015. "How Falsifiable is the Collective Model? a New Test with an Application to Monogamous and Bigamous Households in Burkina Faso," Cahiers de recherche 1505, CIRPEE.
    7. repec:kap:empiri:v:44:y:2017:i:2:d:10.1007_s10663-016-9322-x is not listed on IDEAS
    8. Jongrim Ha & Inhwan So, 2017. "Which Monetary Shocks Matter in Small Open Economies? Evidence from SVARs," Working Papers 2017-2, Economic Research Institute, Bank of Korea.
    9. repec:rfa:aefjnl:v:4:y:2017:i:3:p:77-88 is not listed on IDEAS
    10. Crawford, Gregory S. & Deer, Lachlan & Smith, Jeremy & Sturgeon, Paul, 2017. "The Regulation of Public Service Broadcasters: Should there be more advertising on television?," CEPR Discussion Papers 12428, C.E.P.R. Discussion Papers.
    11. Jeffrey Clemens & Joshua D. Gottlieb, 2017. "In the Shadow of a Giant: Medicare’s Influence on Private Physician Payments," Journal of Political Economy, University of Chicago Press, vol. 125(1), pages 1-39.
    12. Bertille Antoine & Otilia Boldea, 2015. "Efficient Inference with Time-Varying Information and the New Keynesian Phillips Curve," Discussion Papers dp15-04, Department of Economics, Simon Fraser University, revised 25 Aug 2016.
    13. Alice Chen & Darius N. Lakdawalla, 2016. "Saving Lives or Saving Money? Understanding the Dual Nature of Physician Preferences," NBER Working Papers 21930, National Bureau of Economic Research, Inc.
    14. Czerny, Achim I. & Shi, Zijun & Zhang, Anming, 2016. "Can market power be controlled by regulation of core prices alone? An empirical analysis of airport demand and car rental price," Transportation Research Part A: Policy and Practice, Elsevier, vol. 91(C), pages 260-272.
    15. Achim I. Czerny & Zijun Shi & Anming Zhang, 2015. "Can market power be controlled by regulation of core prices alone?: An empirical analysis of airport demand and car rental price," Tinbergen Institute Discussion Papers 15-041/VIII, Tinbergen Institute.
    16. repec:eee:wdevel:v:96:y:2017:i:c:p:503-519 is not listed on IDEAS
    17. repec:eee:jhouse:v:38:y:2017:i:c:p:38-49 is not listed on IDEAS
    18. Stephen L. Ross & Zhentao Shi, 2016. "Measuring Social Interaction Effects when Instruments are Weak," Working papers 2016-37, University of Connecticut, Department of Economics.
    19. E. Monnet & C. Wolf, 2016. "Demographic Cycle, Migration and Housing Investment: a Causal Examination," Working papers 591, Banque de France.
    20. Norris, Jonathan, 2017. "Family and Peer Social Identity Effects on Schooling Attitudes and Performance," UNCG Economics Working Papers 17-1, University of North Carolina at Greensboro, Department of Economics.
    21. Ahmed, Mansur & Goodwin, Barry, "undated". "Agricultural Mechanization and Non-Farm Labor Supply of Farm Households: Evidence from Bangladesh," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236131, Agricultural and Applied Economics Association.
    22. Valerie A. Ramey & Sarah Zubairy, 2014. "Government Spending Multipliers in Good Times and in Bad: Evidence from U.S. Historical Data," NBER Working Papers 20719, National Bureau of Economic Research, Inc.
    23. Daniel L. Bennett & Hugo J. Faria & James D. Gwartney & Daniel R. Morales, 2016. "Economic Institutions and Comparative Economic Development: A Post-Colonial Perspective," Working Papers 2016-07, University of Miami, Department of Economics.
    24. Avdiu, Besart & Gruhle, Tobias, 2018. "Contagion and information frictions in emerging markets: the role of joint signals," MPRA Paper 84872, University Library of Munich, Germany.
    25. Keith Finlay & Leandro M. Magnusson, 2014. "Bootstrap Methods for Inference with Cluster-Sample IV Models," Economics Discussion / Working Papers 14-12, The University of Western Australia, Department of Economics.

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