Generally speaking a consequence of using an instrumental variable approach with a weak instrument will be:
A) imprecise coefficient estimates (e.g., large standard errors).
B) low coefficient estimates.
C) high (in absolute magnitude) coefficient estimates.
D) multicollinearity.

Question

Quizplus · Accepted Answer

A weak instrument can lead to imprecise coefficient estimates, with large standard errors. This is because a weak instrument has little ability to explain the variation in the endogenous variable, making it difficult to properly identify the causal effect of the independent variable on the dependent variable. As a result, the estimated coefficients may be less reliable and less precise.

Generally Speaking a Consequence of Using an Instrumental Variable Approach