Testing for weak instruments in Linear Iv regression

James H. Stock, Motohiro Yogo

Research output: Chapter in Book/Report/Conference proceedingChapter

2263 Scopus citations

Abstract

Weak instruments can produce biased IV estimators and hypothesis tests with large size distortions. But what, precisely, are weak instruments, and how does one detect them in practice? This paper proposes quantitative definitions of weak instruments based on the maximum IV estimator bias, or the maximumWald test size distortion, when there are multiple endogenous regressors.We tabulate critical values that enable using the first-stage F-statistic (or, when there are multiple endogenous regressors, the Cragg–Donald [1993] statistic) to test whether the given instruments are weak.

Original languageEnglish (US)
Title of host publicationIdentification and Inference for Econometric Models
Subtitle of host publicationEssays in Honor of Thomas Rothenberg
PublisherCambridge University Press
Pages80-108
Number of pages29
ISBN (Electronic)9780511614491
ISBN (Print)9780521844413
DOIs
StatePublished - Jan 1 2005
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)

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    Stock, J. H., & Yogo, M. (2005). Testing for weak instruments in Linear Iv regression. In Identification and Inference for Econometric Models: Essays in Honor of Thomas Rothenberg (pp. 80-108). Cambridge University Press. https://doi.org/10.1017/CBO9780511614491.006