IsildursHeir

11-10-2007, 07:35 PM

I am new to this forum and don't know if creating a new thread for help in a problem is an allowed scenario. If it is not, request the mods to please direct me to the correct way of the same. Apologies in advance :)

I have struggled a lot with this but cant seem to find a solution. Will really appreciate if anybody can help.

Suppose that y=a+2x+z+u, where E(u|x,z) = 0. Let q be a random variable with the following properties:

i) Cov(q,x) = 0.7,

ii) Cov(q,z) = 0.5,

iii) Cov(q,u) = 0.5

We run a regression of y on 1 and x but use q as an instrument for x. let b(hat) be the coefficient of x in this IV regression. What is the probability limit of b(hat)?

I have struggled a lot with this but cant seem to find a solution. Will really appreciate if anybody can help.

Suppose that y=a+2x+z+u, where E(u|x,z) = 0. Let q be a random variable with the following properties:

i) Cov(q,x) = 0.7,

ii) Cov(q,z) = 0.5,

iii) Cov(q,u) = 0.5

We run a regression of y on 1 and x but use q as an instrument for x. let b(hat) be the coefficient of x in this IV regression. What is the probability limit of b(hat)?