Which of the following is a step that can remedy an interpolation/extrapolation identification problem?
A) Use a functional form assumption to interpolate/extrapolate.
B) Using an instrumental variable to interpolate/extrapolate.
C) Use two-stage least squares to interpolate/extrapolate.
D) Use a fixed effects model.

Question

Quizplus · Accepted Answer

Using a functional form assumption to interpolate or extrapolate involves making an assumption about the relationship between variables that extends beyond the observed data. This can help address identification problems by providing a structured way to estimate values outside the observed range, thus offering a potential remedy for interpolation or extrapolation issues.

Which of the Following Is a Step That Can Remedy