Two Stage Least Squares Is Calculated as Follows;in the First

question 5

Multiple Choice

Two Stage Least Squares is calculated as follows;in the first stage

• A)Y is regressed on the exogenous variables only.The predicted value of Y is then regressed on the instrumental variables.
• B)the unknown coefficients in the reduced form equation are estimated by OLS, and the predicted values are calculated.In the second stage, Y is regressed on these
• Predicted values and the other exogenous variables.
• C)the exogenous variables are regressed on the instruments.The predicted value of the exogenous variables is then used in the second stage, together with the
• Instruments, to predict the dependent variable.
• D)the unknown coefficients in the reduced form equation are estimated by weighted least squares, and the predicted values are calculated.In the second stage, Y is
• Regressed on these predicted values and the other exogenous variables.

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