Weak instruments are a problem because
A)the TSLS estimator may not be normally distributed, even in large samples.
B)they result in the instruments not being exogenous.
C)the TSLS estimator cannot be computed.
D)you cannot predict the endogenous variables any longer in the first stage.

Question

Quizplus · Accepted Answer

Weak instruments are problematic because they can lead to a Two-Stage Least Squares (TSLS) estimator that is not normally distributed, even in large samples. This undermines the reliability of standard statistical inference methods.

Weak Instruments Are a Problem Because