Question: In the linear model Y Xe with X 2 R suppose 2(x) E e2 j X x is known. Show

In the linear model Y Æ X¯Åe with X 2 R suppose ¾2(x) Æ E

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e2 j X Æ x

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is known. Show that the GLS estimator of ¯ can be written as an instrumental variables estimator using some instrument Z. (Find an expression for Z.)

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