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
Download: PDF (739 KB)Login
(for staff & registered students)
Upcoming Seminars
Monday 28 July 202512:00-13:00
Dr Neil Rankin: Ceo Of Predictive Insights & Stellenbosch University
Topic: "TBC"
12:00-13:00
Prof Willem Boshoff
Topic: "Two competing approaches in South African competition policy: merger control and anti-cartel enforcement over the past 30 years"
12:00-13:00
Prof Derek Yu: University Of The Western Cape
Topic: "Examining the teaching, assessment and research activities of the South African Economics Departments"
BER Weekly
30 May 2025 SARB sees scope to cut the repo rate, while some of Trump’s tariffs are put on holdLocally, the Monetary Policy Committee (MPC) of the SA Reserve Bank (SARB) decided to cut the repo rate by 25bps to 7.25% (prime to 10.75%). The dovish tilt with all six members voting for a cut (and one even preferring a 50bps cut) was surprising – but welcome. Furthermore, the clear signalling around moving to a 3% inflation target is positive and...
Read the full issue
Upcoming Seminars
Monday 28 July 202512:00-13:00
Dr Neil Rankin: Ceo Of Predictive Insights & Stellenbosch University
Topic: "TBC"
12:00-13:00
Prof Willem Boshoff
Topic: "Two competing approaches in South African competition policy: merger control and anti-cartel enforcement over the past 30 years"
12:00-13:00
Prof Derek Yu: University Of The Western Cape
Topic: "Examining the teaching, assessment and research activities of the South African Economics Departments"
BER Weekly
30 May 2025 SARB sees scope to cut the repo rate, while some of Trump’s tariffs are put on holdLocally, the Monetary Policy Committee (MPC) of the SA Reserve Bank (SARB) decided to cut the repo rate by 25bps to 7.25% (prime to 10.75%). The dovish tilt with all six members voting for a cut (and one even preferring a 50bps cut) was surprising – but welcome. Furthermore, the clear signalling around moving to a 3% inflation target is positive and...
Read the full issue