<p>I suggest looking into System GMM. It is a panel regression method that uses past values as instruments and is exactly what you're looking for, I think. It has a few restrictions that much be met, the most important requires you to have more cross-sections than time periods. Without seeing your model and other details that is all I can provide for help. I hope this works for you.</p>

CC BY-SA 4.0
2019-07-12T21:35:34.660Z
2019-07-15T20:54:59.050Z
2019-07-15T20:54:59.050Z
Brennan
<p>I am trying to examine the determinants of economic growth, essentially regressing a number of variables upon economic growth. I face a problem that there is likely simultaneous causality between many of my explanatory variables and the dependent variable. To deal with it I am using instrumental variables. I was wondering would it be reasonable to use the past values of my explanatory variables as instruments for their current values? </p>

<p>Thank you so much for the answers.</p>

<macroeconomics><econometrics><economic-growth><instrumental-variable>
Is it reasonable, in panel data, to use past values of explanatory variables as instruments to deal with simultaneous causality?
Peter Santorin
# Is it reasonable, in panel data, to use past values of explanatory variables as instruments to deal with simultaneous causality?

(Asked by: username_0 on 2019-07-12)

I am trying to examine the determinants of economic growth, essentially regressing a number of variables upon economic growth. I face a problem that there is likely simultaneous causality between many of my explanatory variables and the dependent variable. To deal with it I am using instrumental variables. I was wondering would it be reasonable to use the past values of my explanatory variables as instruments for their current values?

Thank you so much for the answers.

**Tags:** macroeconomics, econometrics, economic-growth, instrumental-variable

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## 1 answers

### Answer by username_1 on 2019-07-12. Score: 1

I suggest looking into System GMM. It is a panel regression method that uses past values as instruments and is exactly what you're looking for, I think. It has a few restrictions that much be met, the most important requires you to have more cross-sections than time periods. Without seeing your model and other details that is all I can provide for help. I hope this works for you.


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