1.Explain the concept of endogeneity in the context of regression analysis. How can instrumental variables be used to address endogeneity? Provide an example to illustrate your explanation.
2.Consider a scenario where you are investigating the relationship between government spending and economic growth. Discuss potential sources of endogeneity in this relationship and propose a suitable instrumental variable that could be used to address this issue. Describe how you would verify the validity of your instrumental variable and its relevance to the research question.
1. What are the main challenges associated with weak instrumental variables in econometric analysis, and how do they affect the reliability of causal inference in empirical research?
2. Can you provide an example of a weak instrumental variable problem in a real-world economic study, and discuss how researchers typically address or mitigate this issue in their analysis?