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Exercise

Practice Computing Causal Effects Using Two-Stage Least Squares (2SLS): CreditCo

Now let us repeat the previous CreditCo analysis, but now use 2SLS to compute the causal effect instead of indirect inference.

Instructions

100 XP
  • 1) Using a linear regression, compute the first-stage effect (i.e. correlation between opting in and the rain storm)
  • 2) Compute the predicted values of opting in
  • 3) Compute the causal effect by linear regression (i.e. correlation between credit balance and predicted opt-in rate)
  • 4) Did opting in to the credit offer increase or decrease credit balances?