1. Consider the normal measurement error model for (y, X, x|Z) with yi |Xi , Zi ...
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1. Consider the normal measurement error model for (y, X, x|Z) with yi |Xi , Zi ∼ N
α + βXi + γ Zi, σ2
ε
, xi |Xi ∼ NXi, σ2
δ
, Xi |Zi ∼ N
μX + κ Zi, σ2
η
, where Z is error free. Show how with transformed X and γ this model can be converted to a specification for (y, X, x) involving a regression of x on Z, namely yi |X∗
i , Zi ∼ N
α + βX∗
i
+ γ
∗Zi, σ2
ε
, xi |X∗
i
∼ NX∗
i
+ κ Zi, σ2
δ
, Xi ∼ N
μX, σ2
η
.
Obtain the joint marginal density of the observations y and x given the parameters {α, β,
γ *, X∗i , κ, μX , σ2
ε , σ2
δ , σ2
η
}.
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