Abstract
In previous chapters we examined extensively the GLM under a variety of circumstances. A common feature of these discussions was a certain aspect of unidirectionality. Generally, variations in the explanatory (right-hand) variables were transmitted to the dependent (left-hand) variable, but not vice versa. Another common feature was that the explanatory variables were assumed to be independent of or, minimally, uncorrelated with the error term of the model. Only in the EIV model was this condition violated.
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Notes
- 1.
This is, strictly speaking, not directly implied by the condition (A.2), unless the model is static, i.e., it does not contain lagged endogenous variables. If the model is dynamic we would need a further assumption regarding the stability of the system. But this aspect lies outside the scope of the present volume and, thus, will not be examined. The reader may either take this on faith or simply regard the discussion as confined to static models.
- 2.
Note that this means that P i is a T × (m i  + G i ) submatrix of X.
- 3.
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Dhrymes, P. (2017). Systems of Simultaneous Equations. In: Introductory Econometrics. Springer, Cham. https://doi.org/10.1007/978-3-319-65916-9_6
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DOI: https://doi.org/10.1007/978-3-319-65916-9_6
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