Question: Consider the following results: where WÌ t , PÌ t , MÌ t , and XÌ t are percentage changes in earnings, prices, import prices,

Consider the following results:

R² = 0.924 |OLS: W, = 0.276 + 0.258P, + 0.046P,-1 +4.959V, OLS: P, = 2.693 + 0.232 W, – 0.544X, +0.247M, + 0.064.M,??

where WÌ‚_t , PÌ‚_t , MÌ‚_t , and XÌ‚_t are percentage changes in earnings, prices, import prices, and labor productivity (all percentage changes are over the previous year), respectively, and where V_trepresents unfilled job vacancies (percentage of total number of employees).

€œSince the OLS and 2SLS results are practically identical, 2SLS is meaningless.€ Comment.

R = 0.924 |OLS: W, = 0.276 + 0.258P, + 0.046P,-1 +4.959V, OLS: P, = 2.693 + 0.232 W, 0.544X, +0.247M, + 0.064.M,1 R = 0.982 2SLS: W, = 0.272 + 0.257P, + 0.046,1 +4.966V, 2SLS: P, = 2.686 + 0.233W, 0.544X, +0.246M, + 0.046 M,1 R = 0.981 R = 0.920

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