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e) Consider the following model: Y = B + B,Y, + B,Z, +u; Assume that cov(Y,,u, )#0 and cov(Z,,u,)=0. Explain in detail how you would test the relationship between the instrumental variable : and the endogenous regressor Y, .

e) Consider the following model: Y = B + B,Y, + B,Z, +u; Assume that cov(Y,,u, )#0 and cov(Z,,u,)=0. Explain in detail how you would test the relationship between the instrumental variable : and the endogenous regressor Y, .

Calculus For The Life Sciences
Calculus For The Life Sciences
2nd Edition
ISBN:9780321964038
Author:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Publisher:GREENWELL, Raymond N., RITCHEY, Nathan P., Lial, Margaret L.
Chapter11: Differential Equations
Section11.CR: Chapter 11 Review
Problem 12CR
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e) Consider the following model: Y = B + B,Y, + B,Z, +u; Assume that cov( Y,,u, )± 0 and cov(Z,,u, )=0. li> Explain in detail how you would test the relationship between the instrumental variable 2: and the endogenous regressor Y, .
Transcribed Image Text:e) Consider the following model: Y = B + B,Y, + B,Z, +u; Assume that cov( Y,,u, )± 0 and cov(Z,,u, )=0. li> Explain in detail how you would test the relationship between the instrumental variable 2: and the endogenous regressor Y, .
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