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Introduction to Econometrics 3rd Edition by James Stock, Mark Watson
Edition 3ISBN: 978-9352863501Introduction to Econometrics 3rd Edition by James Stock, Mark Watson
Edition 3ISBN: 978-9352863501 Exercise 17
Consider the regression model with a single regressor:
Suppose that the assumptions in Key Concept 4.3 are satisfied.
a. Show that X, is a valid instrument. That is, show that Key Concept 12.3 is satisfied with Z i , = X i
b. Show that the IV regression assumptions in Key Concept 12.4 are satisfied with this choice of Z i.
c. Show that the IV estimator constructed using Z i = X j is identical to the OLS estimator.
Suppose that the assumptions in Key Concept 4.3 are satisfied.a. Show that X, is a valid instrument. That is, show that Key Concept 12.3 is satisfied with Z i , = X i
b. Show that the IV regression assumptions in Key Concept 12.4 are satisfied with this choice of Z i.
c. Show that the IV estimator constructed using Z i = X j is identical to the OLS estimator.
Explanation
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a) For a linear regression satisfying OL...
Introduction to Econometrics 3rd Edition by James Stock, Mark Watson
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