Question: Consider the three-equation model y Biszty + us yz Bay's + By + 727* + 22X2 + 12 Y's Yes + where y, y, and

Consider the three-equation model y Biszty + us yz Bay's + By + 727* + 22X2 + 12 Y's Yes + where y, y, and y, are endogenous, and x,, x2, and x, are exogenous. Dis- cuss the identification of each of the equations of the model, based on the order and rank conditions. Now suppose that you want to estimate the first equation by two-stage least squares, but you have only an ordinary least squares program avail- able. Explain carefully, step by step, how you would estimate B, Yiz, and vartu).

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Econometrics Questions!