The First-Stage in an Instrumental Variable Approach to Identify Simultaneous

question 3

Multiple Choice

The first-stage in an instrumental variable approach to identify simultaneous equations is to regress

• A)the endogenous right hand side variables on the instruments and all exogenous variables.
• B)the dependent variable on the predicted endogenous right hand side variables and the exogenous variables in each equation.
• C)instrumental variable on all exogenous variables.
• D)the exogenous right hand side variables on only the instrumental variables.

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