Structural Inference from Reduced Forms with Many Instruments

Wayne Gao and Peter Phillips

No 2062, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This paper develops exact finite sample and asymptotic distributions for structural equation tests based on partially restricted reduced form estimates. Particular attention is given to models with large numbers of instruments, wherein the use of partially restricted reduced form estimates is shown to be especially advantageous in statistical testing even in cases of uniformly weak instruments and reduced forms. Comparisons are made with methods based on unrestricted reduced forms, and numerical computations showing finite sample performance of the tests are reported. Some new results are obtained on inequalities between noncentral chi-squared distributions with different degrees of freedom that assist in analytic power comparisons.

Keywords: Exact distributions; Partial identification; Partially restricted reduced form; Structural inference; Unidentified structure; Weak reduced form (search for similar items in EconPapers)
JEL-codes: C23 C32 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2016-10
New Economics Papers: this item is included in nep-ecm
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Journal Article: Structural inference from reduced forms with many instruments (2017)
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