True or False: Causal relationships are impossible to obtain using OLS with only one independent variable....

True or False: Causal relationships are impossible to obtain using OLS with only one independent variable. Explain.

Expert Solution

Regression analysis consists of two types of modelling.
First, the predictive analysis and second, the casual analysis.
In prediction analysis, we predict the dependent variable on the basis of whatever set of independent variables we have.
But in casual analysis, independent variables are the cause of dependent variable.We estimate how particular independent variable affects the dependent variable.
So using only one independent variable in the OLS for casual analysis might give absurd results because it can face the problem of omitted variable bias.
We must include all the independent variables that affects the dependent variable in casual analysis as it is impossible that dependent variable is affected by only one independent variable.
Though we can set the model to check association with single independent variable, but the model will be incomplete and it might not give best results. Hence, it is always preferred that every independent variable must be included.

Rahul Sunny answered 1 year ago

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