Valid Wald Inference with Many Weak Instruments

Luther Yap

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arXiv · 2311.15932

Valid Wald Inference with Many Weak Instruments

Luther Yap

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Abstract

This paper proposes three novel test procedures that yield valid inference in an environment with many weak instrumental variables (MWIV). It is observed that the t statistic of the jackknife instrumental variable estimator (JIVE) has an asymptotic distribution that is identical to the two-stage-least squares (TSLS) t statistic in the just-identified environment. Consequently, test procedures that were valid for TSLS t are also valid for the JIVE t. Two such procedures, i.e., VtF and conditional Wald, are adapted directly. By exploiting a feature of MWIV environments, a third, more powerful, one-sided VtF-based test procedure can be obtained.

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Luther Yap. 2023-11-27. Valid Wald Inference with Many Weak Instruments. https://arxiv.org/abs/2311.15932

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