Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5096494 | Journal of Econometrics | 2012 | 12 Pages |
Abstract
This paper shows how valid inferences can be made when an instrumental variable does not perfectly satisfy the orthogonality condition. When there is a mild violation of the orthogonality condition, the Anderson and Rubin (1949) test is oversized. In order to correct this problem, the fractionally resampled Anderson-Rubin test is derived by modifying Wu's (1990) resampling technique. We select half of the sample when resampling and obtain valid but conservative critical values. Simulations show that our technique performs well even with moderate to large violation of exogeneity when there is a finite sample correction for the block size choice.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Statistics and Probability
Authors
Daniel Berkowitz, Mehmet Caner, Ying Fang,