Question: 12.7 In an instrumental variable regression model with one regressor, Xi, and two instruments, Z1i and Z2i, the value of the J-statistic is J =

12.7 In an instrumental variable regression model with one regressor, Xi, and two instruments, Z1i and Z2i, the value of the J-statistic is J = 2.2.

a. Does this suggest that E(ui 0Z1i, Z 2i)  0? Explain.

b. What steps would you take if the J-statistic was 22.2?

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