4. A single endogenous explanatory variable Consider the following structural model: y1 = Bo + Biy2 + B2z1 + u1 Suppose now that there are two exogenous variables excluded from the model: 22 and z3. The assumptions that z2 and z3 do not appear in the model and are uncorrelated with the error uj are known as rank conditions The linear combination that is most highly correlated with y2 is given by the reduced form equation for y2: 2SLS overidentifying restrictions y2 = TO + TA121+ 722 + T323 + v2 exclusion restrictions E(v2) = 0, Cov(21, v2) = 0, Cov(22, v2) = 0, and Cov(z3, v2) = 0. Which of the following is the best IV for y2? O 5 = TO +T121 + T222 + T323 + v2 O y5 = TO + 7121 + 722 O vi = TO +7121 + T222 + v2 O 5 = TO +T121 + T222 + T323 What is the least restrictive assumption we need to impose on the T parameters in order for the instrument y5 to not be perfectly correlated with z1? O T2 +0 or 13 #0 O T1 +0 or T2 #0 and T3 # 0 O T1 = 0 and 72 +0 and T3 +0 O T2 +0 and 73 # 0

MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
icon
Related questions
Question

7

 

4. A single endogenous explanatory variable
Consider the following structural model:
y1 = Bo + B1y2 + B2z1+ u1
Suppose now that there are two exogenous variables excluded from the model: z2 and z3.
The assumptions that z2 and z3 do not appear in the model and are uncorrelated with the error uj are known as
rank conditions
The linear combination that is most highly correlated with y2 is given by the reduced form equation for y2:
2SLS
overidentifying restrictions
y2 = TO + TI21+ 7222+ T323 + v2
exclusion restrictions
E(v2) = 0, Cov(21, v2) = 0, Cov(2, v2) = 0, and Cov(z3, v2) = 0.
Which of the following is the best IV for y2?
O y2 = TO +1z1+T2z2 + T323 + V2
y2 = T0 + T121+72z2
O v5 = To + T121 + T222 + v2
Y2 = T0 + TĮ21+T2z2 + T323
What is the least restrictive assumption we need to impose on the T parameters in order for the instrument y5 to not be perfectly correlated with z1?
O T2 +0 or n3 +0
O T1 70 or T2 #0 and 73 +0
T1
0 and T2 + 0 and 73 + 0
O T2 +0 and T3#0
Transcribed Image Text:4. A single endogenous explanatory variable Consider the following structural model: y1 = Bo + B1y2 + B2z1+ u1 Suppose now that there are two exogenous variables excluded from the model: z2 and z3. The assumptions that z2 and z3 do not appear in the model and are uncorrelated with the error uj are known as rank conditions The linear combination that is most highly correlated with y2 is given by the reduced form equation for y2: 2SLS overidentifying restrictions y2 = TO + TI21+ 7222+ T323 + v2 exclusion restrictions E(v2) = 0, Cov(21, v2) = 0, Cov(2, v2) = 0, and Cov(z3, v2) = 0. Which of the following is the best IV for y2? O y2 = TO +1z1+T2z2 + T323 + V2 y2 = T0 + T121+72z2 O v5 = To + T121 + T222 + v2 Y2 = T0 + TĮ21+T2z2 + T323 What is the least restrictive assumption we need to impose on the T parameters in order for the instrument y5 to not be perfectly correlated with z1? O T2 +0 or n3 +0 O T1 70 or T2 #0 and 73 +0 T1 0 and T2 + 0 and 73 + 0 O T2 +0 and T3#0
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Recommended textbooks for you
MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
Statistics
ISBN:
9781119256830
Author:
Amos Gilat
Publisher:
John Wiley & Sons Inc
Probability and Statistics for Engineering and th…
Probability and Statistics for Engineering and th…
Statistics
ISBN:
9781305251809
Author:
Jay L. Devore
Publisher:
Cengage Learning
Statistics for The Behavioral Sciences (MindTap C…
Statistics for The Behavioral Sciences (MindTap C…
Statistics
ISBN:
9781305504912
Author:
Frederick J Gravetter, Larry B. Wallnau
Publisher:
Cengage Learning
Elementary Statistics: Picturing the World (7th E…
Elementary Statistics: Picturing the World (7th E…
Statistics
ISBN:
9780134683416
Author:
Ron Larson, Betsy Farber
Publisher:
PEARSON
The Basic Practice of Statistics
The Basic Practice of Statistics
Statistics
ISBN:
9781319042578
Author:
David S. Moore, William I. Notz, Michael A. Fligner
Publisher:
W. H. Freeman
Introduction to the Practice of Statistics
Introduction to the Practice of Statistics
Statistics
ISBN:
9781319013387
Author:
David S. Moore, George P. McCabe, Bruce A. Craig
Publisher:
W. H. Freeman