A key step in using instrument variable methods is to
A)find one or more exogenous variables that influence your dependent variable.
B)decrease the number of lags in the regression equation.
C)conduct interviews to determine how accurate your data really is.
D)run the regression on two different computers to see if the results differ.
E) eliminate the dependent variable.

Question

Quizplus · Accepted Answer

In using instrument variable methods, the key step is to find one or more exogenous variables that can act as instruments or proxies for the endogenous variable of interest, in order to overcome endogeneity bias.

A Key Step in Using Instrument Variable Methods Is to