Inference about the indirect effect: a likelihood approach

Prior research for constructing confidence intervals for an indirect effect has focused
on a Wald statistic. In this paper, however, the inference problem is analyzed from a
likelihood ratio (LR) perspective. When testing the null hypothesis H0 : D 0, the
LR test statistic leads to the minimum of two t -ratios, whose size can be controlled. A
confidence interval is obtained by inverting the LR statistic. Another confidence interval
is obtained by inverting the sum of two pivotal t -statistics. In the Monte Carlo simulations,
this latter confidence interval is the best performer: it outperforms the commonly
used existing methods.