Doko Tchatoka, Firmin Sabro (2012): Specification Tests with Weak and Invalid Instruments.
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We investigate the size of the Durbin-Wu-Hausman tests for exogeneity when instrumental variables violate the strict exogeneity assumption. We show that these tests are severely size distorted even for a small correlation between the structural error and instruments. We then propose a bootstrap procedure for correcting their size. The proposed bootstrap procedure does not require identification assumptions and is also valid even for moderate correlations between the structural error and instruments, so it can be described as robust to both weak and invalid instruments.
|Item Type:||MPRA Paper|
|Original Title:||Specification Tests with Weak and Invalid Instruments|
|Keywords:||Exogeneity tests; weak instruments; instrument endogeneity; bootstrap technique|
|Subjects:||C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C12 - Hypothesis Testing: General
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C30 - General
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General
|Depositing User:||Firmin Doko Tchatoka|
|Date Deposited:||20. Jul 2012 10:58|
|Last Modified:||16. Feb 2013 03:32|
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