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.

I propose to identify announcement-specific decompositions of asset price changes into monetary policy shocks exploiting heteroskedasticity in intraday data, accommodating both changes in the nature of shocks and the state of the economy across announcements. I compute decompositions with respect to Fed Funds, forward guidance, asset purchase, and Fed information shocks from January 1996 to December 2019. The decompositions illustrate which announcements of unconventional policy measures had significant effects during the Great Recession. Overall, forward guidance and asset purchases have significant effects on yields, spreads, equities, and uncertainty, but the effects of monetary policy vary over time, particularly asset purchases.