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How would you justify the model

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Reference no: EM13881309

Consider the following model: Rt = β0 + β1 Mt + β2 Yt + u1t Yt = α0 + α1 Rt + u2t

where Mt (money supply) is exogenous, Rt is the interest rate, and Yt is GDP.

a. How would you justify the model?

b. Are the equations identi?ed?

c. Using the data given in Table 20.2, estimate the parameters of the identi?ed equations. Justify the method(s) you use.

Reference no: EM13881309

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