Inference in Near Singular Regression

Peter Phillips

No 2009, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This paper considers stationary regression models with near-collinear regressors. Limit theory is developed for regression estimates and test statistics in cases where the signal matrix is nearly singular in finite samples and is asymptotically degenerate. Examples include models that involve evaporating trends in the regressors that arise in conditions such as growth convergence. Structural equation models are also considered and limit theory is derived for the corresponding instrumental variable estimator, Wald test statistic, and overidentification test when the regressors are endogenous.

Keywords: Endogeneity; Instrumental variable; Overidentification test; Regression; Singular Signal Matrix; Structural equation (search for similar items in EconPapers)
JEL-codes: C23 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2015-07
New Economics Papers: this item is included in nep-ecm
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Published in Advances in Econometrics, (July 2016), 36(1): 461-486

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Chapter: Inference in Near-Singular Regression (2016)
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