Counterfactual and Synthetic Control Method: Causal Inference with Instrumented Principal Component Analysis
反事实与合成控制:利用工具化主成分分析进行因果推断
In this paper, we propose a novel method for causal inference within the framework of counterfactual and synthetic control. Matching forward the generalized synthetic control method, our instrumented principal component analysis method instruments factor loadings with predictive covariates rather than including them as regressors. These instrumented factor loadings exhibit time-varying dynamics, offering a better economic interpretation. Covariates are instrumented through a…