Question: For the model y 1 = 1 y 2 + 11 x 1 + 21 x 2 + 1 , y

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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