Valid Confidence Intervals and Inference in the Presence of Weak Instruments

Eric Zivot, Richard Startz and Charles Nelson

International Economic Review, 1998, vol. 39, issue 4, 1119-46

Abstract: The authors investigate confidence intervals and inference for the instrumental variables model with weak instruments. Confidence intervals based on inverting the Lagrange multiplier (LM), likelihood ration (LR), and Anderson-Robin statistics perform far better than the Wald. Performance of the LM and LR statistics is improved by a degrees-of-freedom correction in the overidentified case. The practice of pretesting by looking at the significance of the first-stage regression and then making inference based on the LM or LR statistics leads to better results than pretesting and using the Wald statistic. Copyright 1998 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1998
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Related works:
Working Paper: Valid Confidence Intervals and Inference in the Presence of Weak Instruments (1997)
Working Paper: Valid Confidence Intervals and Inference in the Presence of Weak Instruments (1997)
Working Paper: Valid Confidence Intervals and Inference in the Presence of Weak Instruments (1996)
Working Paper: Valid Confidence Intervals and Inference in the Presence of Weak Instruments (1996)
Working Paper: Valid Confidence Intervals and Inference in the Presence of Weak Instruments (1996)
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