Consider the IV regression model (Y_{i}=beta_{0}+beta_{1} X_{i}+beta_{2} W_{i}+u_{i}), where (Z_{i}) is an instrument. Suppose data on (W_{i})

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Consider the IV regression model $Y_{i}=\beta_{0}+\beta_{1} X_{i}+\beta_{2} W_{i}+u_{i}$, where $Z_{i}$ is an instrument. Suppose data on $W_{i}$ are not available and the model is estimated omitting $W_{i}$ from the regression.

a. Suppose $Z_{i}$ and $W_{i}$ are uncorrelated. Is the IV estimator consistent?

b. Suppose $Z_{i}$ and $W_{i}$ are correlated. Is the IV estimator consistent?

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Introduction To Econometrics

ISBN: 9780134461991

4th Edition

Authors: James Stock, Mark Watson

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Question Posted: May 02, 2024 03:52 AM

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Consider the IV regression model (Y_{i}=beta_{0}+beta_{1} X_{i}+beta_{2} W_{i}+u_{i}), where (Z_{i}) is an instrument. Suppose data on (W_{i})

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Introduction To Econometrics

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