Valid Confidence Intervals and Inference in the Presence of Weak Instruments

Eric Zivot (), Richard Startz and Charles Nelson

Discussion Papers in Economics at the University of Washington from Department of Economics at the University of Washington

Abstract: We investigate confidence intervals and inference for the instrumental variables model with weak instruments. Wald-based confidence intervals for a structural parameter perform poorly in that the probability they reject the null is far greater than their nominal size. We show that the preactice of "pre-testing" by looking at the significance of the fist-stage regression and then making inference based on the Wald statistic leads to extremely poor results when the instruments are very weak.

Keywords: STATISTICS (search for similar items in EconPapers)
JEL-codes: C1 (search for similar items in EconPapers)
Pages: 22 pages
Date: 1997
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Related works:
Journal Article: Valid Confidence Intervals and Inference in the Presence of Weak Instruments (1998)
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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