Question: Q3. Consider the following simultaneous equation models. Ylt = a1 + BY3+ + 81X1+ + ult (1) Y2t = a2 + BY1t + BY3+ +

Q3. Consider the following simultaneous equation models. Ylt = a1 +

Q3. Consider the following simultaneous equation models. Ylt = a1 + BY3+ + 81X1+ + ult (1) Y2t = a2 + BY1t + BY3+ + u2t (2) Y3t = a3 + B2Y2t + 62X2+ + u3t 3 (a) Can you estimate equation (1) with OLS assuming X1 and X2 are exogenous? Explain [2] (b) Use the order condition to identify which of the above equations are just identified. [2]

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