Tests for Over-identifying Restrictions in Partially Identified Linear Structural Equations

Giovanni Forchini

No 20/06, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: Cragg and Donald (1996) have pointed out that the asymptotic size of tests for overidentifying restrictions can be much smaller than the asymptotic nominal size when the structural equation is partially identified. This may lead to misleading inference if the critical values are obtained from a chi-square distribution. To overcome this problem we derive the exact asymptotic distribution of the Byron test statistic. This allows the calculation of asymptotic critical values and p-values corrected for possible failure of identification.

Keywords: Invariant Tests; Over-identifying restrictions; Partially identified structural equation (search for similar items in EconPapers)
JEL-codes: C12 C30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm
Date: Written 2006-11
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