The Effect of Pseudo-exogenous Instrumental Variables on Hausman Test
This paper investigates the potential problem of ‘pseudo-exogenous’ instruments in regression models. We show that the performance of Hausman test is deteriorated when the instruments are asymptotically exogenous but endogenous in finite samples, through Monte Carlo simulations.
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- Hausman, Jerry, 2015.
"Specification tests in econometrics,"
Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
- Wong, Ka-fu, 1996. "Bootstrapping Hausman's exogeneity test," Economics Letters, Elsevier, vol. 53(2), pages 139-143, November.
- Maddala, G S & Jeong, Jinook, 1992. "On the Exact Small Sample Distribution of the Instrumental Variable Estimator," Econometrica, Econometric Society, vol. 60(1), pages 181-83, January.
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