Having more relevant instruments
A)is a problem because instead of being just identified, the regression now becomes overidentified.
B)is like having a larger sample size in that the more information is available for use in the IV regressions.
C)typically results in larger standard errors for the TSLS estimator.
D)is not as important for inference as having the same number of endogenous variables as instruments.

Question

Quizplus · Accepted Answer

Having more relevant instruments is like having a larger sample size in that it provides more information for use in the IV regressions. This can lead to more precise estimates and can help address potential endogeneity issues.

Having More Relevant Instruments