Tests and confidence sets with correct size when instruments are potentially weak
We consider inference in the linear regression model with one endoge- nous variable and potentially weak instruments. We construct confidence sets for the coefficient on the endogenous variable by inverting the Anderson-Rubin, Lagrange multiplier, and conditional likelihood-ratio tests. Our confidence sets have correct coverage probabilities even when the instruments are weak. We propose a numerically simple algorithm for finding these confidence sets, and we present a Stata command that supersedes the one presented in Moreira and Poi (Stata Journal 3: 57–70). Copyright 2006 by StataCorp LP.
Volume (Year): 6 (2006)
Issue (Month): 3 (September)
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- Marcelo J. Moreira & Brian P. Poi, 2003.
"Implementing tests with correct size in the simultaneous equations model,"
StataCorp LP, vol. 3(1), pages 57-70, March.
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- Donald W.K. Andrews & Marcelo Moreira & James H. Stock, 2004. "Optimal Invariant Similar Tests for Instrumental Variables Regression," NBER Technical Working Papers 0299, National Bureau of Economic Research, Inc.
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