Projection-based methods of inference on subsets of parameters are useful for obtaining tests that do not over-reject the true parameter values. However, they are also often criticized for being conservative. We show that the usual method of pro jection can be modifed to obtain tests that are as...

Conventionally, shocks to permanent and transitory components in the unobserved components (UC) model for the log of real GDP are assumed to be uncorrelated. This assumption is mainly for identification of model parameters. In this paper, we show important implications of two popular measures of...

The efficient method of moments (EMM) and indirect inference (II) are two widely used simulation-based techniques for estimating structural models that have intractable likelihood functions. The poor performance in finite samples of traditional coefficient and overidentification tests based on...

We investigate confidence intervals and inference for the instrumental variables model with weak instruments. Wald-based confidence intervals perform poorly in that the probability they reject the null is far greater than their nominal size. In the worst case, Wald-based confidence intervals...