Instrumental Variables (IV) are used in statistical analysis to estimate causal relationships when controlled experiments are not feasible. They help address issues of endogeneity, where an independent variable is correlated with the error term, potentially leading to biased results. An IV is a variable that is correlated with the independent variable but not directly with the dependent variable, except through the independent variable. To effectively use an IV, it must satisfy two key conditions: relevance and exogeneity. Relevance means the IV must be strongly correlated with the independent variable, while exogeneity ensures that the IV does not influence the dependent variable directly. This method is commonly applied in fields like economics and social sciences.