The Second Stage in Two-Sage Least Squares Estimation of a Simultaneous

question 6

Multiple Choice

The second stage in two-sage least squares estimation of a simultaneous system would be to

• A) Estimate the reduced form equations
• B) Replace the endogenous variables that are on the RHS of the structural equations with their reduced form fitted values
• C) Replace all endogenous variables in the structural equations with their reduced form fitted values
• D) Use the fitted values of the endogenous variables from the reduced forms as additional variables in the structural equations.

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