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Flashcards in 12 Instrument variables Deck (2)
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1
Q

properties of instrumental variables

A

Instrument relevance: Zi is correlated with the endogenous regressor Cov(Zi, Xi) != 0

Instrument exogeneity: Zi is uncorrelated with the error term Cov(Zi, ui) = 0 and has no direct effect on Yi

2
Q

instrumental variables regression

A

1) Regress Xi on Zi

2) Regress Yi on ^Xi