Consider the following structural model:31 Bo + B1y2 + B₂²1 +21Suppose now that there are two exogenous variables excluded from the model: 22 and 23.The assumptions that 2₂ and 23 do not appear in the model and are uncorrelated with the error ₁ are known asThe linear combination that is most highly correlated with y2 is given by the reduced form equation for y2:Y2 = πO +1Z1 +T2Z2 + N3Z3+V2E(v2) = 0, Cov(21, v2) = 0, Cov(22, 2) = 0, and Cov(23, 12) = 0.overidentifying restrictionsexclusion restrictions2SLSrank conditions The linear combination that is most highly correlated with 32 is given by the reduced form equation for y2:Y2 = πO +1Z1 +T2Z2 + N3Z3+V2E(v2) = 0, Cov(21, v2) = 0, Cov(22, 2) = 0, and Cov(23, v2) = 0.Which of the following is the best IV for y2?Oy₂ = πO + #1²1 + 7222 + 7323Oy₂ = πO + 121 +222 +2Oy₂ = πO+π121 +222 +7323 +22Oy₂ = πO + 1²1 + 7222overidentifying restrictionsO T2 #0 and 3 #0O T1 #0 and ₂ #0 or π3 #0O π₁ #0 or π₂ #0 and T3 #0O π₂0 or π3 #0exclusion restrictions2SLSrank conditionsWhat is the least restrictive assumption we need to impose on the parameters in order for the instrument y to not be perfectly correlated with z₁?

Answered: Image /qna-images/answer/2c13305e-8f09-4fcc-9735-d0cdb1d0945d.jpg

Answered: Consider the following structural…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

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