[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

st: re: IV regression

From   Kit Baum <>
Subject   st: re: IV regression
Date   Mon, 16 Mar 2009 11:26:21 -0400

Carlos wonders

Second, if the relationship between the proposed instrument and the
endogenous regressor has to be causal (or likely causal).
 would the IV only be valid if this relationship = "IV (likely) causes
the endogenous regressor" or would the IV still be valid if the
relationship is = "endogenous regressor likely causes IV"?

From a statistical point of view, if the endogenous regressor 'causes' the instrument, it is not an instrument. The whole notion is that the endogenous regressor is correlated with the error, which you are trying to purge by means of the instruments. If the instrument is 'caused by' the endogenous regressor, it too will be correlated with the error. A test of overidentifying restrictions (in the case where you have overID) evaluates the null that the instruments, taken together, are suitably orthogonal to the error process.

Kit Baum   |   Boston College Economics and DIW Berlin   |
An Introduction to Stata Programming   |
An Introduction to Modern Econometrics Using Stata   |

*   For searches and help try:

© Copyright 1996–2021 StataCorp LLC   |   Terms of use   |   Privacy   |   Contact us   |   What's new   |   Site index