Which of the following scenarios might allow you to try and test the exogeneity condition of an instrumental variable empirically?
A) When you know your instrument is relevant beforehand.
B) When you can estimate the model using generalized method of moments.
C) When you have two instrument variables and two endogenous variables.
D) When you have two instrument variables and one endogenous variable.

Question

Quizplus · Accepted Answer

Having two instrument variables and one endogenous variable allows for over-identification, which can be tested using tests like the Sargan or Hansen test to assess the exogeneity condition of the instruments.

Which of the Following Scenarios Might Allow You to Try