Using Some of the Examples from Your Textbook, Describe Econometric

question 40

Essay

Using some of the examples from your textbook, describe econometric studies which required instrumental variable techniques. In each case emphasize why the need for instrumental variables arises and how authors have approached the problem. Make sure to include a discussion of overidentification, the validity of instruments, and testing procedures in your essay.

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Definitions:

Strip Bond

A bond where both the principal and regular interest payments have been separated and are sold individually.

Yield Rate

The rate of return on an investment over a specified period, expressed as a percentage, considering both interest and dividends.

Compounded Semi-annually

When interest is compounded semi-annually, it is calculated and added to the principal amount twice a year.

Whale Population

The total number of whales in a particular species or geographical area, often monitored for conservation purposes.