Here Are Some Examples of the Instrumental Variables Regression Model

question 14

Essay

Here are some examples of the instrumental variables regression model.In each case you are given the number of instruments and the J-statistic.Find the relevant value from the distribution,using a 1% and 5% significance level,and make a decision whether or not to reject the null hypothesis.
(a)Yi = β0 + β1X1i + ui,i = 1,... ,n;Z1i,Z2i are valid instruments,J = 2.58.
(b)Yi = β0 + β1X1i + β2X2i + β3W1i + ui,i = 1,... ,n;Z1i,Z2i,Z3i,Z4i are valid instruments,J = 9.63.
(c)Yi = β0 + β1X1i + β2W1i + β3W2i + β4W3i + ui,i = 1,... ,n;Z1i,Z2i,Z3i,Z4i are valid instruments,J = 11.86.

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Definitions:

Pledged Receivables

Assets owed to a company that have been used as collateral for a loan or other financial agreement.

Loan Collateral

Security that a borrower offers a lender to secure a loan.

Uncollected Accounts

Accounts receivable that have not yet been paid by customers, representing outstanding debts owed to a business.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available to meet short-term obligations.