Instrumental variable methods allow for consistent estimation when the explanatory variables (covariates) are correlated with the error terms in a regression model.

More formally, a variable z is called an instrument or instrumental variable for the regressor x in the scalar regression model y = x+u if (1) z is uncorrelated with the error u;and (2) z is …

Sep 18, 2020 · An instrumental variable is a third variable introduced into regression analysis that is correlated with the predictor variable, but uncorrelated with the response variable.

Conditioning on a variable therefore has very different effects depending on whether the variable is a collider or a non-collider variable. In the first case, conditioning on a variable potentially …

In this chapter we focus on the IV regression tool called two-stage least squares (TSLS). The first sections briefly recap the general mechanics and assumptions of IV regression and show how …

Instrumental Variable estimation is used when the model has endogenous X's and can address important threats to internal validity. Learn more.

An instrumental variable (sometimes called an “instrument” variable) is a third variable, Z, used in regression analysis when you have endogenous variables —variables that are influenced by …

Nov 20, 2025 · We are interested in estimating the causal effect of an endogenous regressor \ (X_2\) on an outcome variable \ (Y\), using instrumental variables \ (Z\) to address endogeneity.

Instrumental Variables is an ingenious device to fix the problem where the regression variables are correlated with the regression model's errors

IV regression rests on finding a variable (or variables) that is correlated with X but uncorrelated with u. Such a variable is called an instrumental variable (IV), or just an instrument. Your …