In estimating a regression model with an instrumental variable typically one of two methods is used to estimate the mode. The two methods are:
A) two-stage least squares and fixed effects regression.
B) fixed effects regression and panel data methods.
C) two-stage least squares and generalized method of moments.
D) two-stage least squares and within estimator.

Question

Quizplus · Accepted Answer

Two-stage least squares (2SLS) and generalized method of moments (GMM) are the two methods typically used in estimating a regression model with an instrumental variable. While fixed effects regression and within estimator are also commonly used in econometrics, they are not specific to instrumental variable estimation. Panel data methods may include instrumental variable techniques, but are not a broader category that includes other methods as well. Therefore, the best choice is C, which includes the two methods specific to instrumental variable estimation.

In Estimating a Regression Model with an Instrumental Variable Typically