Q3. Consider the following simultaneous equation models. Yl,= a, + BY3, + 6,X1, +ul; (1 Y2, = @2 + BYl, + BY3, + u2, (2)
Q3. Consider the following simultaneous equation models. Yl,= a, + BY3, + 6,X1, +ul; (1 Y2, = @2 + BYl, + BY3, + u2, (2) Y3, = @3 + BY2+ + 62*2, + u3, (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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