Exam 16: Simultaneous Equations Models

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​The first step in estimating simultaneous equations models (SEMs) with panel data is to find instrumental variables for the endogenous variables in the transformed equation.

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A simultaneous equations model is suitable whenever two variables are determined simultaneously.

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Which of the following statements is true?

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The following equations represent a simultaneous equations model: K1 = The following equations represent a simultaneous equations model: K<sub>1</sub> =   <sub>1</sub>K<sub>2</sub><sup> </sup>+   <sub>1</sub>z<sub>1</sub> + u<sub>1</sub> K<sub>2</sub> =   <sub>2</sub>K<sub>1</sub>+   <sub>2</sub>z<sub>2</sub> + u<sub>2</sub> The reduced form equation for K<sub>2</sub> will express: 1K2 + The following equations represent a simultaneous equations model: K<sub>1</sub> =   <sub>1</sub>K<sub>2</sub><sup> </sup>+   <sub>1</sub>z<sub>1</sub> + u<sub>1</sub> K<sub>2</sub> =   <sub>2</sub>K<sub>1</sub>+   <sub>2</sub>z<sub>2</sub> + u<sub>2</sub> The reduced form equation for K<sub>2</sub> will express: 1z1 + u1 K2 = The following equations represent a simultaneous equations model: K<sub>1</sub> =   <sub>1</sub>K<sub>2</sub><sup> </sup>+   <sub>1</sub>z<sub>1</sub> + u<sub>1</sub> K<sub>2</sub> =   <sub>2</sub>K<sub>1</sub>+   <sub>2</sub>z<sub>2</sub> + u<sub>2</sub> The reduced form equation for K<sub>2</sub> will express: 2K1+ The following equations represent a simultaneous equations model: K<sub>1</sub> =   <sub>1</sub>K<sub>2</sub><sup> </sup>+   <sub>1</sub>z<sub>1</sub> + u<sub>1</sub> K<sub>2</sub> =   <sub>2</sub>K<sub>1</sub>+   <sub>2</sub>z<sub>2</sub> + u<sub>2</sub> The reduced form equation for K<sub>2</sub> will express: 2z2 + u2 The reduced form equation for K2 will express:

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A predetermined variable in a simultaneous equations model is:

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