Are Nearly â€œExogenous Instrumentsâ€ Reliable?

We show that when instruments are nearly exogenous, the two stage least squares t-statistic unpredictably over-rejects or under-rejects the null hypothesis that the endogenous regressor is insignificant and Anderson-Rubin test over-rejects the null. We prove that in the limit these tests are no longer nuisance parameter free.

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Year of publication:	2013-10-14
Authors:	Berkowitz, Daniel ; Mehmet Caner* ; Fang, Ying
Subject:	Valid Instruments \| Weak Identification \| Inference

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Series:	Working Paper.
Type of publication:	Book / Working Paper
Notes:	published Number 2013-10-14
Classification:	C30 - Econometric Methods: Multiple/Simultaneous Equation Models. General
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010892075