A Robust Test for Weak Instruments for 2SLS with Multiple Endogenous Regressors

Abstract We develop a test for instrument strength based on the bias of two-stage least squares (2SLS) that (1) generalizes Stock and Yogo’s and Sanderson and Windmeijer’s tests to be robust to heteroskedasticity and autocorrelation, and (2) extends Montiel Olea and Pflueger’s robust test for models with a single endogenous regressor to multiple endogenous regressors. Our test can be based either on an absolute bias criterion or on the 2SLS bias relative to a worst-case benchmark. We also develop extensions to test whether weak instruments cause bias in individual 2SLS coefficients. In simulations, our test controls size and is powerful, and we provide efficient code packages for its practical implementation. We demonstrate our testing procedures in the context of the estimation of state-dependent fiscal multipliers, following recent leading estimates.

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Publication Details

Journal
The Review of Economic Studies
Published
2025-12-20
DOI
https://doi.org/10.1093/restud/rdaf103
Citations
3
Primary Topic
Economic Policies and Impacts
Type
article
Field-Weighted Citation Impact
9.39
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article

A Robust Test for Weak Instruments for 2SLS with Multiple Endogenous Regressors

Karel Mertens, Daniel J Lewis
3 citations
The Review of Economic Studies
Economic Policies and Impacts
9.39
article

A Robust Test for Weak Instruments for 2SLS with Multiple Endogenous Regressors

Karel Mertens, Daniel J Lewis
article en
3 citations

Abstract

Abstract We develop a test for instrument strength based on the bias of two-stage least squares (2SLS) that (1) generalizes Stock and Yogo’s and Sanderson and Windmeijer’s tests to be robust to heteroskedasticity and autocorrelation, and (2) extends Montiel Olea and Pflueger’s robust test for models with a single endogenous regressor to multiple endogenous regressors. Our test can be based either on an absolute bias criterion or on the 2SLS bias relative to a worst-case benchmark. We also develop extensions to test whether weak instruments cause bias in individual 2SLS coefficients. In simulations, our test controls size and is powerful, and we provide efficient code packages for its practical implementation. We demonstrate our testing procedures in the context of the estimation of state-dependent fiscal multipliers, following recent leading estimates.

The Review of Economic Studies
Center for Economic and Policy Research (US), Centre for Economic Policy Research (GB), University College London (GB), Federal Reserve Bank of Dallas (US)
Openalex Percentile: Top 2%
Economic Policies and Impacts
9.39
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