Factor-Based Identification-Robust Interference in IV Regressions (replication data)

DOI

Robust methods for instrumental variable inference have received considerable attention recently. Their analysis has raised a variety of problematic issues such as size/power trade-offs resulting from weak or many instruments. We show that information reduction methods provide a useful and practical solution to this and related problems. Formally, we propose factor-based modifications to three popular weak-instrument-robust statistics, and illustrate their validity asymptotically and in finite samples. Results are derived using asymptotic settings that are commonly used in both the factor and weak-instrument literature. For the Anderson-Rubin statistic, we also provide analytical finite-sample results that do not require any underlying factor structure. An illustrative Monte Carlo study reveals the following. Factor-based tests control size regardless of instruments and factor quality. All factor-based tests are systematically more powerful than standard counterparts. With informative instruments and in contrast to standard tests: (i) power of factor-based tests is not affected by k even when large; and (ii) weak factor structure does not cost power. An empirical study on a New Keynesian macroeconomic model suggests that our factor-based methods can bridge a number of gaps between structural and statistical modeling.

Identifier
DOI https://doi.org/10.15456/jae.2022326.0658833444
Metadata Access https://www.da-ra.de/oaip/oai?verb=GetRecord&metadataPrefix=oai_dc&identifier=oai:oai.da-ra.de:775530
Provenance
Creator Kapetanios, Georges; Khalaf, Lynda; Marcellino, Massimiliano
Publisher ZBW - Leibniz Informationszentrum Wirtschaft
Publication Year 2016
Rights Creative Commons Attribution 4.0 (CC-BY); Download
OpenAccess true
Contact ZBW - Leibniz Informationszentrum Wirtschaft
Representation
Language English
Resource Type Collection
Discipline Economics