Simple Adaptive Size-Exact Testing for Full-Vector and Subvector Inference in Moment Inequality Models
Xiaoxia Shi – University of Wisconsin-Madison
We propose a simple test for moment inequalities that has exact size in normal models with known variance and has uniformly asymptotically exact size under asymptotic normality. The test compares the quasi-likelihood ratio statistic to a chi-squared critical value, where the degree of freedom is the rank of the inequalities that are active infinite samples. The test requires no simulation and thus is computationally fast and
especially suitable for constructing confidence sets for parameters by test inversion. It uses no tuning parameter for moment selection and yet still adapts to the slackness of the moment inequalities. Furthermore, we show how the test can be easily adapted to inference on subvectors in the common empirical setting of conditional moment inequalities with nuisance parameters entering linearly. User-friendly Matlab code to implement the test is provided.
Joint work with Gregory Cox.
Link to Paper: https://www.ssc.wisc.edu/~xshi/research/CoxShiTest.pdf