A proxy for an independent variable in a multiple regression analysis, there is some degree of error in the measurement of the variable. It causes model misspecification errors. What does this mean?
I think an example of proxy independant variable would be the “actual inflation” when you want to use the “expected inflation”… You cannot anymore use the “expected inflation” as an independant variable (unless your economic departement has stored somewhere their expected inflaton for the last 5 years) so you use a proxy, the actual inflation of the last 5 years… I think that is it.