Consider the following macro-economic model, which is a structural model, C = α0 + α1 + u where Ci is aggregate consumpt
Posted: Mon May 02, 2022 8:37 am
Consider the following macro-economic model, which is a
structural model,
C = α0 + α1 + u
where Ci is aggregate consumption in year i,
Yi is GNP, and α1 is the Marginal Propensity
to Consume out of income (the MPC). Suppose that z1 and
z2 are two instruments for Y.
What conditions do z1 and z2 need to
satisfy as instruments for Y?
structural model,
C = α0 + α1 + u
where Ci is aggregate consumption in year i,
Yi is GNP, and α1 is the Marginal Propensity
to Consume out of income (the MPC). Suppose that z1 and
z2 are two instruments for Y.
What conditions do z1 and z2 need to
satisfy as instruments for Y?