CFDP 2009

Peter C. B. Phillips, “Inference in Near Singular Regression” (July 2015) [20pp, abstract] [see CFP 1525]


Abstract: 

This paper considers stationary regression models with near-collinear regressors. Limit theory is developed for regression estimates and test statistics in cases where the signal matrix is nearly singular in finite samples and is asymptotically degenerate. Examples include models that involve evaporating trends in the regressors that arise in conditions such as growth convergence. Structural equation models are also considered and limit theory is derived for the corresponding instrumental variable estimator, Wald test statistic, and overidentification test when the regressors are endogenous.

Keywords: Endogeneity, Instrumental variable, Overidentification test, Regression, Singular Signal Matrix, Structural equation

JEL classification: C23