In the discussion of the instrumental variables estimator, we showed that the least squares estimator b is
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In the discussion of the instrumental variables estimator, we showed that the least squares estimator b is biased and inconsistent. Nonetheless, b does estimate something: plim b = θ = β + Q−1γ. Derive the asymptotic covariance matrix of b, and show that b is asymptotically normally distributed.
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To obtain the asymptotic distribution write the result already in hand as b Q ...View the full answer
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