Consider the following system of equations: System 1: System 2: Yt Bo + BiXt + BSt...

Transcribed Image Text:

Consider the following system of equations: System 1: System 2: Yt Bo + BiXt + B₂St + u₁t Zt ao + a₁X + Uzt Y₂ = Zt W₁ = ao + a₂Ut + a₂ Pt + U₁t Pt Bo + B₂W + B₂Rt + B3Mt + Uzt a) Use the order conditions to determine the identification of each equation in each system (that is, whether the equations are under-identified, over-identified or exactly identified). [5 marks] b) Carefully derive the conditions under which the OLS estimate of a₁ from the Z, equation in System 1 would be consistent. [12 marks] c) A researcher intends on estimating each equation of System 2 using OLS. Carefully discuss the consequences of using OLS to estimate each equation of system 2. Describe an alternative method. [19 marks] Consider the following system of equations: System 1: System 2: Yt Bo+ B₁Xt + B₂St + u₁t Ztao + a₁X + Uzt Yt = Zt W₁ = αo + a₁Ut + a₂ Pt + U₁t Pt Bo + B₁W + B₂Rt + B3Mt + Uzt a) Use the order conditions to determine the identification of each equation in each system (that is, whether the equations are under-identified, over-identified or exactly identified). [5 marks] b) Carefully derive the conditions under which the OLS estimate of a₁ from the Z, equation in System 1 would be consistent. [12 marks] c) A researcher intends on estimating each equation of System 2 using OLS. Carefully discuss the consequences of using OLS to estimate each equation of system 2. Describe an alternative method. [19 marks] Consider the following system of equations: System 1: System 2: Yt Bo + BiXt + B₂St + u₁t Zt ao + a₁X + Uzt Y₂ = Zt W₁ = ao + a₂Ut + a₂ Pt + U₁t Pt Bo + B₂W + B₂Rt + B3Mt + Uzt a) Use the order conditions to determine the identification of each equation in each system (that is, whether the equations are under-identified, over-identified or exactly identified). [5 marks] b) Carefully derive the conditions under which the OLS estimate of a₁ from the Z, equation in System 1 would be consistent. [12 marks] c) A researcher intends on estimating each equation of System 2 using OLS. Carefully discuss the consequences of using OLS to estimate each equation of system 2. Describe an alternative method. [19 marks] Consider the following system of equations: System 1: System 2: Yt Bo+ B₁Xt + B₂St + u₁t Ztao + a₁X + Uzt Yt = Zt W₁ = αo + a₁Ut + a₂ Pt + U₁t Pt Bo + B₁W + B₂Rt + B3Mt + Uzt a) Use the order conditions to determine the identification of each equation in each system (that is, whether the equations are under-identified, over-identified or exactly identified). [5 marks] b) Carefully derive the conditions under which the OLS estimate of a₁ from the Z, equation in System 1 would be consistent. [12 marks] c) A researcher intends on estimating each equation of System 2 using OLS. Carefully discuss the consequences of using OLS to estimate each equation of system 2. Describe an alternative method. [19 marks]

Answer rating: 100% (QA)

Here are the answers to your questions a Identification of equations using order conditions System 1 Equation 1 Y Bo B1X B2S U1t It has three endogeno... View the full answer