I'm doing a research on impact of trade liberalization on economic development. The four development indicators i have selected from Dudley Seers meaning of development are poverty, per capita gdp, income inequality and employment. The simultaneous model thus constructed is:
P = α0 + α1G + α2 PGDP + α3EMP + α4TL + ε (1)
G = β0 + β1PGDP + β2CPI + β3TL + ε (2)
PGDP = γ0 + γ1EMP + γ2HK + γ3INV + γ4TL + ε (3)
EMP = λ0 + λ1PGDP + λ2LW + λ3INV + λ4TL + ε (4)
Where
PGDp--------- Per Capita Gross Domestic Product
G------------- Gini Coefficient
EMP------------- Employed Labor Force
CPI---------------- Consumer Price Index
HK--------------- Human Capital
INV------------------Ratio of Domestic Investment to GDP
W---------------------Real Wages
TL-------------------- Trade Liberalization (trade to GDP ratio)
ε ---------------------- Error Term
the endogenous variables are pgdp, emp, poverty and gini coefficient. while cpi, inv, tl, w and hk are exogenous variables. Eviews is asking for instrumental variables. What will be the instrumental variables in the model?
Please help in 2sls estimation
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