Linear regression is a commonly used technique to understand relationships between variables. For linear regression to work well, certain assumptions must hold. An instrumental variable (IV) is a way to work around a situation where one of these assumptions does not hold.
To use an instrument in IV estimation, it must have certain characteristics. If the instrument does not meet the criteria, it is often called a weak instrument.
Linear regression is a commonly used technique to understand relationships between variables. For linear regression to work well, certain assumptions must hold. An instrumental variable (IV) is a way to work around a situation where one of these assumptions does not hold.
ReplyDeleteTo use an instrument in IV estimation, it must have certain characteristics. If the instrument does not meet the criteria, it is often called a weak instrument.