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Are Nearly “Exogenous Instruments” Reliable?

Daniel Berkowitz (), Mehmet Caner () and Ying Fang ()

No 2013-10-14, Working Papers from Wang Yanan Institute for Studies in Economics (WISE), Xiamen University

Abstract: We show that when instruments are nearly exogenous, the two stage least squares t-statistic unpredictably over-rejects or under-rejects the null hypothesis that the endogenous regressor is insignificant and Anderson-Rubin test over-rejects the null. We prove that in the limit these tests are no longer nuisance parameter free.

Keywords: Valid Instruments; Weak Identification; Inference. (search for similar items in EconPapers)
JEL-codes: C30 (search for similar items in EconPapers)
Date: 2013-10-14
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Working Paper: Are "Nearly Exogenous" Instruments Reliable? (2013) Downloads
Journal Article: Are "Nearly Exogenous Instruments" reliable? (2008) Downloads
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