Question 1 Suppose in a system of equation below, Y1 and Y2 are endogenous variables. Show mathematically

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Suppose in a system of equation below, Y1 and Y2 are endogenous variables. Show mathematically that the Y2 equation is exactly identified and the Y1 equation is not identified.

Y1=a+bY2+cX1+u1

Y2=d+eY1+u2

Hint: Express these structural equations in reduced form equations. Then use the reduced form parameter estimates to solve for the structural parameters. This is an example of indirect least squares (ILS).

Posted Date: Jun 25, 2024 11:12 PM

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Question 1 Suppose in a system of equation below, Y1 and Y2 are endogenous variables. Show mathematically

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