What is an instrumental variable?
An instrumental variable (IV) is a tool used in regression analysis to solve the problem of endogeneity — when an explanatory variable is correlated with the error term. A good instrument must satisfy two...
Tagged: Instrumental Variables
What is endogenity? and why it matters?
Endogeneity refers to a situation in which an explanatory variable is correlated with the error term in a regression model. This violates a key assumption of classical linear regression and leads to biased and...
