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I think there are two things being confused here. A test of the

hypothesis that the excluded instruments are orthogonal to the error

process, commonly known as a test of overidentification or

overidentifying restrictions, can only be done when your IV

specification is overidentified (when you have more excluded

instruments than included endogenous variables). You cannot challenge

the instruments in an exactly identified specification.

On the other hand that orthogonality hypothesis is only one of three

which should be tested for a given instrument. The other two are:

1) meaningful correlation between instrument(s) and endogenous

variables: the various 'weak instruments' tests

2) the exclusion restriction: the instrument does not itself belong in

the equation. Now if it does, it might be either exogenous or

endogenous. Naturally, if it is excluded, it will be correlated with

the error process, and will likely trigger rejection of the first

hypothesis. That can readily be tested by including it in the

equation. If you only have one instrument, you will have to find

something else to identify the equation, but you do want to ensure

that the hypothesis that the instrument has only an indirect effect on

y (through the endogenous variable(s)) rather than a direct effect on

y is reasonable for your instrument(s).

PS> Stata, unlike SAS, TSP, RATS, MATLAB, SPSS etc. is not an acronym.

Kit Baum, Boston College Economics and DIW Berlin

http://ideas.repec.org/e/pba1.htmlAn Introduction to Modern Econometrics Using Stata:

http://www.stata-press.com/books/imeus.htmlOn Dec 6, 2008, at 02:33 , Carlos wrote:

> Do all the parametric tests of sensitivity of IVs to the violation of

> the exclusion restriction that are available in STATA require more

> than one IV (=overidentification tests)? In other words, what if I

> have only one IV? Is ti possible to run such a sensitivity test in

> STATA?

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