Bootstrap Confidence Sets with Weak Instruments

Russell Davidson and James MacKinnon

Econometric Reviews, 2014, vol. 33, issue 5-6, 651-675

Abstract: We study several methods of constructing confidence sets for the coefficient of the single right-hand-side endogenous variable in a linear equation with weak instruments. Two of these are based on conditional likelihood ratio (CLR) tests, and the others are based on inverting t statistics or the bootstrap P values associated with them. We propose a new method for constructing bootstrap confidence sets based on t statistics. In large samples, the procedures that generally work best are CLR confidence sets using asymptotic critical values and bootstrap confidence sets based on limited-information maximum likelihood (LIML) estimates.

Date: 2014
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Working Paper: Bootstrap Confidence Sets with Weak Instruments (2014)
Working Paper: Bootstrap Confidence Sets With Weak Instruments (2012)
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DOI: 10.1080/07474938.2013.825177

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