A Geometric Approach to Weakly Identified Econometric Models

Anna Mikusheva (MIT Economics)
E62-687

Many nonlinear Econometric models show evidence of weak identification. In this paper we consider minimum distance statistics and show that in a broad class of models the problem of testing under weak identification is closely related to the problem of testing a curved null in a finite-sample Gaussian model. Using the curvature of the model, we develop new finite-sample bounds on the distribution of minimum-distance statistics, which we show can be used to detect weak identification and to construct tests…

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