TY - JOUR
AU - Andrews,Donald W.K.
AU - Stock,James H.
TI - Inference with Weak Instruments
JF - National Bureau of Economic Research Technical Working Paper Series
VL - No. 313
PY - 2005
Y2 - August 2005
DO - 10.3386/t0313
UR - http://www.nber.org/papers/t0313
L1 - http://www.nber.org/papers/t0313.pdf
N1 - Author contact info:
Donald Andrews
E-Mail: donald.andrews@yale.edu
James H. Stock
Department of Economics
Harvard University
Littauer Center M26
Cambridge, MA 02138
Tel: 617/496-0502
Fax: 617/495-7730
E-Mail: James_Stock@harvard.edu
AB - This paper reviews recent developments in methods for dealing with weak instruments (IVs) in IV regression models. The focus is more on tests and confidence intervals derived from tests than on estimators. The paper also presents new testing results under "many weak IV asymptotics," which are relevant when the number of IVs is large and the coefficients on the IVs are relatively small. Asymptotic power envelopes for invariant tests are established. Power comparisons of the conditional likelihood ratio (CLR), Anderson- Rubin, and Lagrange multiplier tests are made. Numerical results show that the CLR test is on the asymptotic power envelope. This holds no matter what the relative magnitude of the IV strength to the number of IVs.
ER -