TY  - CHAP
AB  - 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 (IV) estimator, Wald test statistic, and overidentification test when the regressors are endogenous. It is shown that near-singular designs of the type considered here are not completely fatal to least squares inference, but do inevitably involve size distortion except in special Gaussian cases. In the endogenous case, IV estimation is inconsistent and both the block Wald test and Sargan overidentification test are conservative, biasing these tests in favor of the null.
VL  - 36
SN  - 978-1-78560-786-8, 978-1-78560-787-5/0731-9053
DO  - 10.1108/S0731-905320160000036022
UR  - https://doi.org/10.1108/S0731-905320160000036022
AU  - Phillips Peter C. B.
PY  - 2016
Y1  - 2016/01/01
TI  - Inference in Near-Singular Regression
T2  - Essays in Honor of Aman Ullah
T3  - Advances in Econometrics
PB  - Emerald Group Publishing Limited
SP  - 461
EP  - 486
Y2  - 2024/04/20
ER  -