For the model y 1 = 1 y 2 + 11 x 1 +
Question:
For the model
y1 = γ1y2 + β11x1 + β21x2 + ε1,
y2 = γ2y1 + β32x3 + β42x4 + ε2,
show that there are two restrictions on the reduced form coefficients. Describe a procedure for estimating the model while incorporating the restrictions.
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The structure is or y xB The reduced form coefficient matrix ...View the full answer
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