Endogeneity and Instrumental Variables in Dynamic Models
21 Pages Posted: 4 Jul 2010
Date Written: April 23, 2010
The objective of the paper is to draw the theory of endogeneity in dynamic models in discrete and continuous time, in particular for diffusions and counting processes. We first provide an extension of the separable set-up to a separable dynamic framework given in term of semi-martingale decomposition.Then we define our function of interest as a stopping time for an additional noise process, whose role is played by a Brownian motion for diffusions, and a Poisson process for counting processes.
Keywords: Endogeneity, Instrumental Variables, Dynamic Models, Duration Models
JEL Classification: C14, C32, C51
Suggested Citation: Suggested Citation