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(c) Consider the following set of simultaneous equations: Yl = a, + 8,X1+ + ult (4) Y2t = a2+ BY1+ + BY3+ + u2t (5)
(c) Consider the following set of simultaneous equations: Yl = a, + 8,X1+ + ult (4) Y2t = a2+ BY1+ + BY3+ + u2t (5) Y3t = a3 + B2Y2+ + 62X2+ + 13t (6 Can you estimate equation (4) with OLS assuming X1 and X2 are exogenous? Explain. [2] (d) Write down the reduced form equation for the endogenous variables Y2, and Y3,? [2] (e) Can you estimate equations (5) and (6) with the Indirect Least Square method? Explain. [2]
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