1. Assume that we have a sample of 100 observations for two variables 2 and 22,...
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1. Assume that we have a sample of 100 observations for two variables 2₁ and 22, with ₁ = 1 and T2 = 2. Besides, we have riz₁ = 150, 2 = 550 and ₁2 = 260, where ₁ and ₂ are the vectors of 100 x 1. With this sample we have the two-equation system: Ili = μ+ €11 T2i = μl + €2i+ Please: (a) Compute the OLS estimator of μ, and estimate its sampling variance. (b) Compute the FGLS estimator of μ, and its sampling variance. (c) Compare your results in the first two parts of the question. 2. Suppose an analyst has a system of two equations: yli = 3121 + Eli y2i = 32x21 +33x3i + €2i, (1) (2) (3) where the variances and covariance of the errors 1 and 2, are known. The analyst applies the GLS to the system, but mistakenly omits 23 from Equation (4). Please state the consequence of the mis-specification of the model regarding the consistency of the estimator of 3₁. 1. Assume that we have a sample of 100 observations for two variables 2₁ and 22, with ₁ = 1 and T2 = 2. Besides, we have riz₁ = 150, 2 = 550 and ₁2 = 260, where ₁ and ₂ are the vectors of 100 x 1. With this sample we have the two-equation system: Ili = μ+ €11 T2i = μl + €2i+ Please: (a) Compute the OLS estimator of μ, and estimate its sampling variance. (b) Compute the FGLS estimator of μ, and its sampling variance. (c) Compare your results in the first two parts of the question. 2. Suppose an analyst has a system of two equations: yli = 3121 + Eli y2i = 32x21 +33x3i + €2i, (1) (2) (3) where the variances and covariance of the errors 1 and 2, are known. The analyst applies the GLS to the system, but mistakenly omits 23 from Equation (4). Please state the consequence of the mis-specification of the model regarding the consistency of the estimator of 3₁.
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ANSWER a The OLS estimator of is given by 1100 150 1 5... View the full answer
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