Confidence intervals for bias and size distortion in IV and local projections–IV models

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• dc.contributor.author Ganics, Gergely
• dc.contributor.author Inoue, Atsushi
• dc.contributor.author Rossi, Barbara, 1971-
• dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
• dc.date.accessioned 2020-05-25T09:26:51Z
• dc.date.available 2020-05-25T09:26:51Z
• dc.date.issued 2018-09-29
• dc.date.modified 2020-05-25T09:25:52Z
• dc.description.abstract In this paper we propose methods to construct confidence intervals for the bias of the two-stage least squares estimator, and the size distortion of the associated Wald test in instrumental variable models. Importantly our framework covers the local projections instrumental variable model as well. Unlike tests for weak instruments, whose distributions are non-standard and depend on nuisance parameters that cannot be estimated consistently, the confidence intervals for the strength of identification are straightforward and computationally easy to calculate, as they are obtained from inverting a chi-squared distribution. Furthermore, they provide more information to researchers on instrument strength than the binary decision offered by tests. Monte Carlo simulations show that the confidence intervals have good small sample coverage. We illustrate the usefulness of the proposed methods to measure the strength of identification in two empirical situations: the estimation of the intertemporal elasticity of substitution in a linearized Euler equation, and government spending multipliers.
• dc.format.mimetype application/pdf*
• dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1640
• dc.identifier.citation
• dc.identifier.uri http://hdl.handle.net/10230/44705
• dc.language.iso eng
• dc.relation.ispartofseries Economics and Business Working Papers Series; 1640
• dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
• dc.subject.keyword instrumental variables
• dc.subject.keyword weak instruments
• dc.subject.keyword weak identification
• dc.subject.keyword concentration parameter
• dc.subject.keyword local projections.
• dc.subject.keyword Macroeconomics and International Economics
• dc.subject.keyword Statistics, Econometrics and Quantitative Methods
• dc.title Confidence intervals for bias and size distortion in IV and local projections–IV models
• dc.title.alternative
• dc.type info:eu-repo/semantics/workingPaper