Econometrics Exam 3

True or False

True

Suppose that you have measurement error  in an independent variable.  If the measurement error is uncorrelated  with the true, unobserved independent variable, then measurement error does not bias the OLS estimator. True or False

False

Which of the following tests are valid econometric tests for measurement error in an independent variable?

Actually, there are no formal tests for measurement error.

True or False

True

There are no consequences to having measurement error in y if the measurement error is uncorrelated with x. True or False

False

The instrumental variables (IV) estimator is biased but consistent. True or False

True

Instrumental variables can help to address which of the following econometric problems? (select all that apply)

• measurement error

• functional form misspecification

• omitted variables

• the covariance between x and z is not equal to zero

• the covariance between u and z is equal to zero

In most cases, it is straightforward to use the data to test the "validity" condition for an instrumental variable. True or False

False

Instrumental Variables can address violations of which classical linear model assumptions?

MLR.4

The asymptotic bias of the IV estimator can be written as______________.

True or False

False

Imagine that you have a valid instrumental variable that is a "weak instrument".  What are the consequences for the IV estimator for a regression slope coefficient?

(select all that apply)

• finite sample bias may be large

• the standard error may be large

Regressing x on z, performing an F test of the hypothesis that the coefficient on z is zero, and then calculating 1/F.

OLS is equivalent to IV when x is the instrument for itself. True or False

True

Pooled cross section data sets are usually created by combining multiple samples drawn from different populations at the same point in time. True or False

False

Panel data estimators are similar to IV methods in the sense that they allow us to relax MLR.4 in order to obtain estimators that are biased in small samples but consistent in large samples. True or False

False

Covid 19 is an example of a natural experiment. True or False.

True

A key limitation of pooled OLS estimation is that it requires you to assume that the shape of the regression function is constant over time. True or False

False

The Clean Air Act is an example of a natural experiment. True or False

False

True or False

True

True or False

False