Choosing Instruments

Since the monthly discounts are chosen independently of special offer sales but do affect CD and book sales, they should make good instrument variables. Additionally, the lagged CD and book sales should also make good instruments.

  1. To create variables containing the lagged CD and book sales, from the menus choose:

    Transform > Create Time Series...

    Figure 1. Create Time Series main dialog box
    Create Time Series main dialog box
  2. Select Lag as the Function.
  3. Select buycd_1 and buybk_1 as new variables.
  4. Click OK.

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