Consider a two equation model: y₁ = az, + U₁t y₁ =B₁z, +B₂x, +U₂t; t=1,2,..., T where y, and z, are endogenous variables, x, is an exogenous variable, u₁, and u2, are serially uncorrelated disturbances with zero means, variances of and of and covariance ₁2 for all t. Write down the reduced form corresponding to y and z. Suggest a method of estimation of the reduced form parameters, which will give unbiased and consistent estimators.

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