Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/266104 
Year of Publication: 
2022
Series/Report no.: 
Staff Report No. 1020
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
We extend the popular bias-based test of Stock and Yogo (2005) for instrument strength in linear instrumental variables regressions with multiple endogenous regressors to be robust to heteroskedasticity and autocorrelation. Equivalently, we extend the robust test of Montiel Olea and Pflueger (2013) for one endogenous regressor to the general case with multiple endogenous regressors. We describe a simple procedure for applied researchers to conduct our generalized first-stage test of instrument strength and provide efficient and easy-to-use Matlab code for its implementation. We demonstrate our testing procedures by considering the estimation of the state-dependent effects of fiscal policy as in Ramey and Zubairy (2018).
Subjects: 
instrumental variables
weak instruments test
multiple endogenous regressors
heteroskedasticity
serial correlation
JEL: 
C26
C36
Document Type: 
Working Paper

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