A Specification Test for Nonparametric Instrumental Variable Regression

49 Pages Posted: 11 May 2007 Last revised: 21 Oct 2008

See all articles by Patrick Gagliardini

Patrick Gagliardini

USI Università della Svizzera italiana; Swiss Finance Institute

O. Scaillet

University of Geneva GSEM and GFRI; Swiss Finance Institute; University of Geneva - Research Center for Statistics

Date Written: October 1, 2008

Abstract

We consider testing for correct specification of a nonparametric instrumental variable regression. In this ill-posed inverse problem setting, the test statistic is based on the empirical minimum distance criterion corresponding to the conditional moment restriction evaluated with a Tikhonov Regularized estimator of the functional parameter. Its asymptotic distribution is normal under the null hypothesis, and a consistent bootstrap is available to get simulation based critical values. We explore the finite sample behavior with Monte Carlo experiments. Finally, we provide an empirical application for an estimated Engel curve.

Keywords: Specification Test, Nonparametric Regression, Instrumental, Variables, Minimum Distance, Tikhonov Regularization, Ill-posed Inverse Problems, Generalized Method of Moments, Bootstrap, Engel Curve

JEL Classification: C13, C14, C15, D12

Suggested Citation

Gagliardini, Patrick and Scaillet, Olivier, A Specification Test for Nonparametric Instrumental Variable Regression (October 1, 2008). Swiss Finance Institute Research Paper No. 07-13. Available at SSRN: https://ssrn.com/abstract=985315 or http://dx.doi.org/10.2139/ssrn.985315

Patrick Gagliardini (Contact Author)

USI Università della Svizzera italiana ( email )

Via Buffi 13
Lugano, TN 6900
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Olivier Scaillet

University of Geneva GSEM and GFRI ( email )

40 Boulevard du Pont d'Arve
Geneva 4, 1211
Switzerland
+ 41 22 379 88 16 (Phone)
+41 22 389 81 04 (Fax)

HOME PAGE: http://www.scaillet.ch

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

University of Geneva - Research Center for Statistics

Geneva
Switzerland

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