Author Question: You have estimated a government reaction function, i.e., a multiple regression equation, where a ... (Read 113 times)

lbcchick · **on:** Jun 29, 2018

You have estimated a government reaction function, i.e., a multiple regression equation, where a government instrument, say the federal funds rate, depends on past government target variables, such as inflation and unemployment rates.

Question 2

Write an essay about where valid instruments come from. Part of your explorations must deal with checking the validity of instruments and what the consequences of weak instruments are.