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March 11th, 2016, 12:36 PM  #1 
Member Joined: Sep 2013 Posts: 67 Thanks: 0  Financial econometrics  exam question
Consider the following simultaneous system of equations, $\displaystyle \[\begin{array}{l} {y_t} = \beta {x_t} + \delta {p_t} + {u_t}\\ {x_t} = \gamma {y_t} + \theta {q_t} + {v_t} \end{array}\]$ where p t and q t are exogenous variables. (a) You are interested in estimating the equation for y t . Please describe in a precise and detailed manner how you would achieve a consistent estimator. [5 marks] (b) The equations stated above for y t and x t are the structural equations. What is the reducedform equation for y t ? [5 marks] Last edited by Ku5htr1m; March 11th, 2016 at 01:04 PM. 

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