Background Indicators

Econometrics

Burkhard Raunig¹ 

[1] Central Bank of Austria, Economic Studies Division, Otto-Wagner-Platz 3, 1090 Vienna, Austria;

关键词: causal graph;    latent variable;    indicator variable;    instrumental variable;    financial development;    stock market volatility;   

DOI  :  10.3390/econometrics7020020

来源: DOAJ

【 摘 要 】

It is customary to assume that an indicator of a latent variable is driven by the latent variable and some random noise. In contrast, a background indicator is also systematically influenced by variables outside the structural model of interest. Background indicators deserve attention because in empirical work they are difficult to distinguish from ordinary effect indicators. This paper assesses instrumental variable (IV) estimation of the effect of a latent variable in a linear model when a background indicator replaces the latent variable. It turns out that IV estimates are inconsistent in many important cases. In some cases, the estimates capture causal effects of the indicator rather than causal effects of the latent variable. A simulation experiment that considers the impact of economic uncertainty on aggregate consumption illustrates some of the results.

【 授权许可】

Unknown