When There Is a Single Instrument and Single Regressor, the TSLS

question 39

Short Answer

When there is a single instrument and single regressor, the TSLS estimator for the slope can be calculated as follows a. $\widehat { \beta } _ { 1 } ^ { T S L S } = \frac { s _ { Z Y } } { s _ { Z X } }$ .

b. $\widehat { \beta } _ { 1 } ^ { \text {TSLS } } = \frac { s _ { X Y } } { s _ { X } ^ { 2 } }$ .

c. $\widehat { \beta } _ { 1 } ^ { \text {TSLS } } = \frac { s _ { Z X } } { s _ { Z Y } }$ .

d. $\hat { \beta } _ { 1 } ^ { T L L S } = \frac { s _ { Z Y } } { s _ { Z } ^ { 2 } }$ .

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Definitions:

Discretionary Fiscal Policy

Government policy actions, such as changes in taxation or spending, intentionally made to influence economic activity.

Falling Output

A situation where the quantity of goods or services produced by an economy decreases over time.

World Interest Rates

The average level of interest rates across different countries, significantly influenced by major economies' monetary policies.

Real Interest Rates

The interest rate adjusted for inflation, reflecting the real cost of borrowing or the real yield on savings.