Which of the following problems would lead an economist to use instrument variable methods?
A)the dependent variable has an impact on the independent variable.
B)there are too few quarters of data.
C)there are too many independent variables.
D)the R2 is too high.
E)the residuals are too small.

Question

Quizplus · Accepted Answer

Instrument variable methods are used when there is endogeneity, meaning that the dependent variable has an impact on the independent variable.

Which of the Following Problems Would Lead an Economist to Use