Instrument-free inference under confined regressor endogeneity; derivations and applications
Stellenbosch Working Paper Series No. WP09/2020Publication date: June 2020
Author(s):
Instead of exploiting instruments and claiming these to be uncorrelated with the disturbances, in an instrument-free approach one may adopt flexible bounds on the correlation between the endogenous regressors and the disturbances. Such an alternative to Two-Stage Least-Squares (TSLS) inference is developed here for general linear models with endogenous possibly time-dependent regressors. Earlier results enabled this just for rather restrictive mesokurtic i.i.d. cross-section data. In three empirical replication studies their underlying exclusion restrictions are shown to be most doubtful. Next, incredible (weak-instrument robust) TSLS inference is replaced by more reliable remarkably narrow instrument-free asymptotically conservative confidence intervals.
JEL Classification:C12, C13, C21, C22, C26
Keywords:endogeneity robust least-squares inference, new exclusion restrictions test, replication studies, sensitivity analysis of two-stage least-squares
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Prof Euan Phimister: Stellenbosch Business School
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Topic: "Allocative Efficiency, Labour Shares, and Corporate Lobbying in European Manufacturing"
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Prof Masashige Hamano: Waseda University
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26 Sep 2025 Free Weekly Review | Number 37 | 26 SeptemberThis report covers the key domestic and international data releases over the past week. The more comprehensive BER Weekly Review (Enhanced Version) includes a detailed discussion on the main economic events and developments over the past week, a summary of upcoming data (the week ahead) and the BER’s forecast for key economic indicators....
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