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Problem:
a) Using a financial or economics theory, determine a simultaneous structural model and a recursive model, explaining each variable used in the models.
b) Using your above formulated simultaneous structural model, obtain the reduced form equations and deduce whether the equations are over/under or just-identified.
c) Based on your results from part (b), explain which methodology(ies) can be used to estimate the reduced form equations and why.
d) Explain in details which test can be used to test for the exogeneity of a variable. Answers must be supported by an example.
Factor that affect the volume of production
#question.elaborate the different methods for the estimation of simultaneous equation model in case of exact and over identification?
(b) Suppose that the initial conditions are as follows: y0 = 0 and et = 0 for t= 0. Impose the initial conditions in order to find the general solution.
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