The model produces the following reduced-form equations: Y 1t = 4 + 8X 1t Y 2t =
Question:
produces the following reduced-form equations:
Y1t = 4 + 8X1t
Y2t = 2 + 12X1t
a. Which structural coefficients, if any, can be estimated from the reduced-form coefficients? Demonstrate your contention.
b. How does the answer to (a) change if it is known a priori that (1) β12 = 0 and (2) β10 = 0?
Transcribed Image Text:
|Yu = B10 + B12Y21 + Y11X1: +u1t Y21 = B20 + B21 Yu +u2;
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a In this example Y 1 is not identified but Y ...View the full answer
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