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Wild Bootstrap Tests for IV Regression

  • Russell Davidson

    ()

    (McGill University)

  • James G. MacKinnon

    ()

    (Queen's University)

We propose a wild bootstrap procedure for linear regression models estimated by instrumental variables. Like other bootstrap procedures that we have proposed elsewhere, it uses efficient estimates of the reduced-form equation(s). Unlike them, it takes account of possible heteroskedasticity of unknown form. We apply this procedure to t tests, including heteroskedasticity-robust t tests, and to the Anderson-Rubin test. We provide simulation evidence that it works far better than older methods, such as the pairs bootstrap. We also show how to obtain reliable confidence intervals by inverting bootstrap tests. An empirical example illustrates the utility of these procedures.

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File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1135.pdf
File Function: Second version 2008
Download Restriction: no

Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1135.

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Length: 34 pages
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:qed:wpaper:1135
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  1. Gonçalves, Sílvia & KILIAN, Lutz, 2003. "Bootstrapping Autoregressions with Conditional Heteroskedasticity of Unknown Form," Cahiers de recherche 01-2003, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  2. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
  3. Russell Davidson & James MacKinnon, 2006. "Bootstrap Inference In A Linear Equation Estimated By Instrumental Variables," Departmental Working Papers 2006-21, McGill University, Department of Economics.
  4. JAMES G. MacKINNON, 2006. "Bootstrap Methods in Econometrics," The Economic Record, The Economic Society of Australia, vol. 82(s1), pages S2-S18, 09.
  5. Russell Davidson & Emmanuel Flachaire, 2000. "The Wild Bootstrap, Tamed at Last," Econometric Society World Congress 2000 Contributed Papers 1413, Econometric Society.
  6. Frank Kleibergen, 2002. "Pivotal Statistics for Testing Structural Parameters in Instrumental Variables Regression," Econometrica, Econometric Society, vol. 70(5), pages 1781-1803, September.
  7. Marcelo J. Moreira & Jack R. Porter & Gustavo A. Suarez, 2004. "Bootstrap and Higher-Order Expansion Validity When Instruments May Be Weak," Harvard Institute of Economic Research Working Papers 2048, Harvard - Institute of Economic Research.
  8. Davidson, Russell & MacKinnon, James G., 1999. "The Size Distortion Of Bootstrap Tests," Econometric Theory, Cambridge University Press, vol. 15(03), pages 361-376, June.
  9. Donald W. K. Andrews & Marcelo J. Moreira & James H. Stock, 2006. "Optimal Two-Sided Invariant Similar Tests for Instrumental Variables Regression," Econometrica, Econometric Society, vol. 74(3), pages 715-752, 05.
  10. Russell Davidson & James Mackinnon, 2009. "Bootstrap inference in a linear equation estimated by instrumental variables," Working Papers halshs-00442713, HAL.
  11. Alfonso Flores-Lagunes, 2007. "Finite sample evidence of IV estimators under weak instruments," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(3), pages 677-694.
  12. Marcelo J. Moreira, 2003. "A Conditional Likelihood Ratio Test for Structural Models," Econometrica, Econometric Society, vol. 71(4), pages 1027-1048, 07.
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