Wald tests for IV regression with weak instruments

• Ano de defesa: 2013
• Autor(a) principal: Vilela, Lucas Pimentel
• Orientador(a): Moreira, Marcelo Jovita
• Tipo de documento: Dissertação
• Tipo de acesso: Acesso aberto
• Idioma: eng
• Palavras-chave em Português: Regressão com variáveis instrumentais; Testes invariantes; Testes ótimos; Testes similares; Testes não viesados; Instrumentos fracos
• Palavras-chave em Inglês: Instrumental variable regression; Invariant tests; Optimal tests; Similar tests; Unbiased tests; Weak instruments
• Link de acesso: https://hdl.handle.net/10438/11222

This dissertation deals with the problem of making inference when there is weak identification in models of instrumental variables regression. More specifically we are interested in one-sided hypothesis testing for the coefficient of the endogenous variable when the instruments are weak. The focus is on the conditional tests based on likelihood ratio, score and Wald statistics. Theoretical and numerical work shows that the conditional t-test based on the two-stage least square (2SLS) estimator performs well even when instruments are weakly correlated with the endogenous variable. The conditional approach correct uniformly its size and when the population F-statistic is as small as two, its power is near the power envelopes for similar and non-similar tests. This finding is surprising considering the bad performance of the two-sided conditional t-tests found in Andrews, Moreira and Stock (2007). Given this counter intuitive result, we propose novel two-sided t-tests which are approximately unbiased and can perform as well as the conditional likelihood ratio (CLR) test of Moreira (2003).