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http://ssrn.com/abstract=1734933
 
 

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Testing for Weak Instruments in Linear IV Regression


James H. Stock


Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Motohiro Yogo


Federal Reserve Bank of Minneapolis

September 10, 2004

IDENTIFICATION AND INFERENCE FOR ECONOMETRIC MODELS: ESSAYS IN HONOR OF THOMAS ROTHENBERG, 2005

Abstract:     
Weak instruments can produce biased IV estimators and hypothesis tests with large size distortions. But what, precisely, are weak instruments, and how does one detect them in practice? This paper proposes quantitative definitions of weak instruments based on the maximum IV estimator bias, or the maximum Wald test size distortion, when there are multiple endogenous regressors. We tabulate critical values that enable using the first-stage F-statistic (or, when there are multiple endogenous regressors, the Cragg-Donald [1993] statistic) to test whether the given instruments are weak.

Number of Pages in PDF File: 48

JEL Classification: C01

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Date posted: January 7, 2011 ; Last revised: July 31, 2013

Suggested Citation

Stock, James H. and Yogo, Motohiro, Testing for Weak Instruments in Linear IV Regression (September 10, 2004). IDENTIFICATION AND INFERENCE FOR ECONOMETRIC MODELS: ESSAYS IN HONOR OF THOMAS ROTHENBERG, 2005 . Available at SSRN: http://ssrn.com/abstract=1734933

Contact Information

James H. Stock
Harvard University - Department of Economics ( email )
Littauer Center
Cambridge, MA 02138
United States
617-496-0502 (Phone)
617-496-5960 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Motohiro Yogo (Contact Author)
Federal Reserve Bank of Minneapolis ( email )
90 Hennepin Avenue
Minneapolis, MN 55401-1804
United States
HOME PAGE: http://https://sites.google.com/site/motohiroyogo/
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