In practice, the most difficult aspect of IV estimation is
A)finding instruments that are both relevant and exogenous.
B)that you have to use two stages in the estimation process.
C)calculating the J-statistic.
D)finding instruments that are exogenous. Relevant instruments are easy to find.

Question

Quizplus · Accepted Answer

Finding instruments that are both relevant (i.e., correlated with the endogenous variable) and exogenous (i.e., not correlated with the error term) can be challenging in practice. The other options listed are not necessarily difficult or the main challenge associated with IV estimation.

In Practice, the Most Difficult Aspect of IV Estimation Is