Journal of Business and Economic Statistics· 2013Q1
A Robust Test for Weak Instruments
- 1,119citations
- Q1SCImago
- 2013year
Short summary
A new test for weak instruments in instrumental variables regression is robust to heteroscedasticity, autocorrelation, and clustering, outperforming the Stock and Yogo (2005) test in identifying weak instruments across more countries when estimating the elasticity of intertemporal substitution.
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Key points
- Introduces a new test for weak instruments in instrumental variables regression.
- The test is robust to heteroscedasticity, autocorrelation, and clustering.
- It uses a scaled nonrobust first-stage F statistic.
- The test was applied to estimate the elasticity of intertemporal substitution, identifying weak instruments in more countries than the Stock and Yogo (2005) test.
AI-generated from the title and abstract; the full text is not read.
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 Stock, J. and Yogo, M. 2005. “Testing for Weak Instruments In Linear IV Regression,”. In Identification and Inference for Econometric Models: Essays in Honor of Thomas Rothenberg, Edited by: W, D., Andrews, ., J, and, H, . and Stock, . 80–108. Cambridge: Cambridge University Press. [Crossref] , [Google Scholar]. Supplementary materials for this article are available online.
The authors' abstract, as published at the source. Journal of Business and Economic Statistics, 2013 · DOI ↗
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Field: General Economics, Econometrics and Finance
General Economics, Econometrics and FinanceEconomics, Econometrics and Finance