Finite-Sample Inference Methods for Simultaneous Equations and Models with Unobserved and Generated Regressors

Jean-Marie Dufour () and Joann Jasiak

Cahiers de recherche from Universite de Montreal, Departement de sciences economiques

Abstract: We propose finite sample tests and confidence sets for models with unobserved and generated regressors as well as various models estimated by instrumental variables methods. The validity of the procedures is unaffected by the presence of identification problems or "weak instruments", so no detection of such problems is required. We study two distinct approaches for various models considered by Pagan (1984). The first one is an instrument substitution method which generalizes an approach proposed by Anderson and Rubin (1949) and Fuller (1987) for different (although related) problems, while the second one is based on splitting the sample. The instrument substitution method uses the instruments directly, instead of generated regressors, in order to test hypotheses about the "structural parameters" of interest and build confidence sets. The second approach relies on "generated regressors", which allows a gain in degrees of freedom, and a sample split technique. For inference about general possibly nonlinear transformations of model parameters, projection techniques are proposed. A distributional theory is obtained under the assumptions of Gaussian errors and strictly exogenous regressors. We show that the various tests and confidence sets proposed are (locally) "asymptotically valid" under much weaker assumptions. The properties of the tests proposed are examined in simulation experiments. In general, they outperform the usual asymptotic inference methods in terms of both reliability and power. Finally, the techniques suggested are applied to a model of Tobin’s q and to a model of academic performance.

Keywords: simultaneous equations; structural model; instrumental variables; weak instruments; generated regressor; Anderson-Rubin method; votal function; same-sit; exact test; confidence region; ojection techniques; Tobin’s q; academic rformance. (search for similar items in EconPapers)
JEL-codes: C1 C12 C3 C5 E22 I2 J24 (search for similar items in EconPapers)
Pages: 27 pages
Date: 1998
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/1866/461 (application/pdf)

Related works:
Working Paper: Finite Sample Inference Methods for Simultaneous Equations and Models with Unobserved and Generated Regressors (2000)
Working Paper: Finite Sample Inference Methods for Simultaneous Equations and Models with Unobserved and Generated Regressors (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mtl:montde:9812

Access Statistics for this paper

More papers in Cahiers de recherche from Universite de Montreal, Departement de sciences economiques Contact information at EDIRC.
Bibliographic data for series maintained by Sharon BREWER ().