Instrument-free inference under confined regressor endogeneity; derivations and applications

Stellenbosch Working Paper Series No. WP09/2020
 
Publication date: June 2020
 
Author(s):
Jan F. Kiviet (University of Amsterdam and Stellenbosch University)
 
Abstract:

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)



Need a password?
Forgot your password?

Upcoming Seminars

No seminars are currently listed. Please check back soon.
 
More...

BER Weekly

3 August 2020
The week started with news of the confirmation of the $4.3 billion (bn) loan from the International Monetary Fund (IMF) through its Rapid Financing Instrument. In the process of obtaining the loan, the government re-committed itself to the fiscal consolidation outlined in the supplementary budget presented in June, including to introduce zero-based...

Read the full issue
 

Upcoming Seminars

No seminars are currently listed. Please check back soon.
 
More...

BER Weekly

3 August 2020
The week started with news of the confirmation of the $4.3 billion (bn) loan from the International Monetary Fund (IMF) through its Rapid Financing Instrument. In the process of obtaining the loan, the government re-committed itself to the fiscal consolidation outlined in the supplementary budget presented in June, including to introduce zero-based...

Read the full issue