# Econometrics-Simultaneous Linear Equations Model (ISS (Statistical Services) Statistics Paper III): Questions 1 - 1 of 1

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## Question number: 1

» Econometrics » Simultaneous Linear Equations Model

Appeared in Year: 2015

### Describe in Detail

Describe the two-stage least squares (2SLS) procedure for structural estimation in a simultaneous equations model. Show that it coincides with indirect least square method when the equation is exactly identified.

### Explanation

Most of the economic theory is built upon system of relationship. We will consider various estimation procedures for the system of simultaneous equation models. One of the estimation is two-stage least squares is to purify the stochastic explanatory variable Y _{1} of the influence of the stochastic disturbance u. This