Bayesian Synthetic Control Methods Example

less than 1 minute read

Published: March 23, 2023

In this post, I test the Bayesian Synthetic Control Model presented in Kim et al (2020) using both simulated data and the “smoking” data set from Abadie et al (2010). The BSC.pdf slides provide background on synthetic controls, compare standard synthetic control to BSCM and explain the example provided in the markdown file “bscm_class_example.md”. References are provided at the end of the pdf slides.

Instrumental Variables FAQ

4 minute read

Published: March 17, 2023

What makes a valid instrument?

A valid instrument must be exogeneous and a strong predictor of the explanatory variable of interest. For an instrument to be considered exogenous, it must be uncorrelated with the error term in the regression model. This means it does not have a direct relationship on the dependent variable, but only affects the dependent variable through our endogenous regressor. Our instrument is considered strong when it is a strong predictor of our endogenous regressor (has a high correlation).