Endogeneity and Instrumental Variables in Dynamic Models

21 Pages Posted: 4 Jul 2010

Date Written: April 23, 2010

Abstract

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

Florens, Jean-Pierre and Simon, Guillaume, Endogeneity and Instrumental Variables in Dynamic Models (April 23, 2010). Available at SSRN: https://ssrn.com/abstract=1633935 or http://dx.doi.org/10.2139/ssrn.1633935

Jean-Pierre Florens

University of Toulouse ( email )

Manufacture des Tabacs
21 Allees de Brienne IDEI
31000 Toulouse
France
+33(0)5 61 12 85 96 (Phone)
+33(0)5 61 12 86 37 (Fax)

Guillaume Simon (Contact Author)

Capital Fund Management ( email )

23 rue de l'Université
Paris, 75007
France

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