This paper considers the problem of constructing tests and conﬁdence intervals (CIs) that have correct asymptotic size in a broad class of non-regular models. The models considered are non-regular in the sense that standard test statistics have asymptotic distributions that are discontinuous in some parameters. It is shown in Andrews and Guggenberger (2005a) that standard ﬁxed critical value, subsample, and b < n bootstrap methods often have incorrect size in such models. This paper introduces general methods of constructing tests and CIs that have correct size. First, procedures are introduced that are a hybrid of subsample and ﬁxed critical value methods. The resulting hybrid procedures are easy to compute and have correct size asymptotically in many, but not all, cases of interest. Second, the paper introduces size-correction and “plug-in” size-correction methods for ﬁxed critical value, subsample, and hybrid tests. The paper also introduces ﬁnite-sample adjustments to the asymptotic results of Andrews and Guggenberger (2005a) for subsample and hybrid methods and employs these adjustments in size-correction. The paper discusses several examples in detail. The examples are: (i) tests when a nuisance parameter may be near a boundary, (ii) CIs in an autoregressive model with a root that may be close to unity, and (iii) tests and CIs based on a post-conservative model selection estimator.
Andrews, Donald W.K. and Guggenberger, Patrik, "Hybrid and Size-Corrected Subsample Methods" (2007). Cowles Foundation Discussion Papers. 1900.