In econometrics, simultaneity arises when:
A)strictly exogenous explanatory variables determine the dependent variable through a step-by-step process.
B)the error term is correlated with both the dependent variable and explanatory variables.
C)one or more of the explanatory variables is jointly determined with the dependent variable.
D)both serial correlation and heteroskedasticity are present in an hypothesized model.

Question

Quizplus · Accepted Answer

Simultaneity arises when one or more of the explanatory variables is jointly determined with the dependent variable. This means that the dependent variable and one or more explanatory variables affect each other simultaneously, making it difficult to identify the causal relationship between them.

In Econometrics, Simultaneity Arises When