,the simultaneity problem refers to
A) the possible correlation between openness and financial reform
B) the time lag between increasing openness and its effect on GDP per capita
C) the possibility that GDP influences openness at the same time that openness affects GDP
D) the fact that cross-country data may not be available for the same years
E) the likely correlation between the error terms associated with successive observations

Question

Quizplus · Accepted Answer

The simultaneity problem refers to the possibility that GDP influences openness at the same time that openness affects GDP, creating a feedback loop and making it difficult to establish causality between the two variables. This is a common challenge in analyzing the relationship between economic openness and growth. The other choices do not accurately describe the simultaneity problem.

,The Simultaneity Problem Refers to