Valid Confidence Regions and Inference in the Presence of Weak Instruments

Eric Zivot (), Charles Nelson and Richard Startz

Working Papers from University of Washington, Department of Economics

Abstract: We investigate confidence intervals and inference for the instrumental variables model with weak instruments. Wald-based confidence intervals perform poorly in that the probability they reject the null is far greater than their nominal size. In the worst case, Wald-based confidence intervals always exclude the true paremeter value. Confidence intervals based on the LM, LR, and Anderson-Rubin statistics perform far better than the Wald. The Anderson-Rubin statistic always has the correct size, but LM and LR statistics have somewhat greater power. Performance of the LM and LR statistics is improved by a degrees-of-freedom correction in the overidentified ccase. We show that the practice of "pre- testing" by looking at the significance of the first -stage regression leads to extremely poor results when the instruments are very weak.

Date: 1996-02
Note: June 1996 version
References: Add references at CitEc
Citations:

Downloads: (external link)
http://weber.u.washington.edu/~econo/faculty/weak4f96.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to weber.u.washington.edu:80 (No such host is known. )

Related works:
Working Paper: Valid Confidence Regions and Inference in the Presence of Weak Instruments (1996)
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:wop:wuecwp:_002

Access Statistics for this paper

More papers in Working Papers from University of Washington, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Krichel ().