A conditional likelihood ratio test for structural models

• Autor(a) principal: Moreira, Marcelo J.
• Data de Publicação: 2002
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Institucional do FGV (FGV Repositório Digital)
• Texto Completo: http://hdl.handle.net/10438/12955
• topic: Instrumental variables; Similar tests; Wald test; Likelihood ratio test; Power envelope; Confidence regions; 2SLS estimator; LIML estimator; Economia; Variáveis instrumentais (Estatística)

This paper develops a general method for constructing similar tests based on the conditional distribution of nonpivotal statistics in a simultaneous equations model with normal errors and known reducedform covariance matrix. The test based on the likelihood ratio statistic is particularly simple and has good power properties. When identification is strong, the power curve of this conditional likelihood ratio test is essentially equal to the power envelope for similar tests. Monte Carlo simulations also suggest that this test dominates the Anderson- Rubin test and the score test. Dropping the restrictive assumption of disturbances normally distributed with known covariance matrix, approximate conditional tests are found that behave well in small samples even when identification is weak.