A classmate is interested in estimating the variance of the error term in Equation (12.1). a. Suppose
Question:
a. Suppose that she uses the estimator from the second-stage regression of TSLS:
-1.png){kind=small}
where Xi is the fitted value from the first-stage regression. Is this estimator consistent? (For the purposes of this question suppose that the sample is very large and the TSLS estimators are essentially identical to β0 and β1.)
b. Is
-2.png){kind=small}
consistent?
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a The estimator is not consistent Write this as where Replacing with 1 as suggeste...View the full answer
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Related Book For 
Introduction to Econometrics
ISBN: 978-0133595420
3rd edition
Authors: James H. Stock, Mark W. Watson
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