The Conditions for a Valid Instruments Do Not Include the Following

question 22

Short Answer

The conditions for a valid instruments do not include the following: a. each instrument must be uncorrelated with the error term.
b. each one of the instrumental variables must be normally distributed.
c. at least one of the instruments must enter the population regression of $X$ on the $Z$ 's and the $W$ 's.
d. perfect multicollinearity between the predicted endogenous variables and the exogenous variables must be ruled out.

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Definitions:

Retirement Account

A financial account designed specifically for savings, investment, and accumulation of money for retirement.

Initial Deposit

The first sum of money placed into an account to open it or start an investment.

Nominal Interest Rate

The stated interest rate on a loan or investment, not accounting for compounding or inflation effects.

Compounded Monthly

A method of calculating interest where the accumulated interest is added to the principal sum each month, leading to an increase in the amount of subsequent interest accrued.