 Bounding the difference between true and nominal rejection probabilities in tests of hypotheses about instrumental variables modelsJoel L. Horowitz Journal of Econometrics, 2021, vol. 222, issue 2, 1057-1082 Abstract: This paper presents a simple method for carrying out inference in a wide variety of possibly nonlinear IV models under weak assumptions. The method provides a finite-sample bound on the difference between the true and nominal probabilities of rejecting a correct null hypothesis. The method is a non-Studentized version of the S test of Stock and Wright (2000) but is implemented and analyzed differently. It does not require restrictive distributional assumptions, linearity of the estimated model, simultaneous equations, or information about whether the instruments are strong or weak. It can be applied to quantile IV models that may be nonlinear and can be used to test a parametric IV model against a nonparametric alternative. It provides information about the relation between the “degree of weakness” of the instruments and the power of the test. The bound presented here holds in finite samples, regardless of the strength of the instruments. Keywords: Instrumental variables; Normal approximation; Finite-sample bounds (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:222:y:2021:i:2:p:1057-1082 DOI: 10.1016/j.jeconom.2020.08.007 Access Statistics for this article Journal of Econometrics is currently edited by T. Amemiya, A. R. Gallant, J. F. Geweke, C. Hsiao and P. M. Robinson More articles in Journal of Econometrics from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.