Robust confidence sets in the presence of weak instruments
By: Anna Mikusheva
Contributors: Massachusetts Institute of Technology. Dept. of Economics
Edition: Rev.
Series: Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 07-27; Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 07-27.
Publisher: Massachusetts Institute of Technology, Dept. of Economics
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Number of pages: 27
Description: This paper considers instrumental variable regression with a single endogenous variable and the potential presence of weak instruments. I construct confidence sets for the coefficient on the single endogenous regressor by inverting tests robust to weak instruments. I suggest a numerically simple algorithm for finding the Conditional Likelihood Ratio (CLR) confidence sets. The full descriptions of possible forms of the CLR, Anderson-Rubin (AR) and Lagrange Multiplier (LM) confidence sets are given. I show that the CLR confidence sets have nearly shortest expected arc length among similar symmetric invariant confidence sets in a circular model. I also prove that the CLR confidence set is asymptotically valid in a model with non-normal errors. Keywords: weak instruments, confidence set, invariance.
Notes: "August 1, 2005. Revised: October 12, 2007."

Includes bibliographic reference (leaves 17-18).

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