t-Tests in a Structural Equation with Many Instruments

Yukitoshi Matsushita

No CIRJE-F-467, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: This paper studies the properties of t-ratios associated with the limited information maximum likelihood (LIML) estimators in a structural form estimation when the number of instrumental variables is large. Asymptotic expansions are made of the distributions of a large K t-ratio statistic under large-Kn asymptotics. A modified t-ratio statistic is proposed from the asymptotic expansion. The power of the large K t-ratio test dominates the AR test, the K-test by Kleibergen (2002), and the conditional LR test by Moreira (2003); and the difference can be substantial when the instruments are weak.

Pages: 36 pages
Date: 2007-02
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2007cf467

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