Correct specification for IV when variables are interacted

For technical questions regarding estimation of single equations, systems, VARs, Factor analysis and State Space Models in EViews. General econometric questions and advice should go in the Econometric Discussions forum.

Moderators: EViews Gareth, EViews Moderator

oksanakim
Posts: 35
Joined: Wed Apr 04, 2012 10:38 am

Correct specification for IV when variables are interacted

Postby oksanakim » Wed Sep 20, 2017 5:45 pm

Hello All

I very much appreciate your help on the following. My regression is Y=a0+a1*x1+a2*x1*x2+controls (simplified). I believe that x1 is endogenous and would like to estimate the regression using the 2SLS with the instrumental variable approach. I found Z that should be a good instrument. Now, What should I put in the Instruments list when I estimate 2SLS? I put "Y then c then Z then Z*x2 then controls". Is this a correct specification? I am asking because in my original regression, x1 (endogenous) is interacted with x2 that is exogenous. So, would it be correct to specify "Z then Z*x2" in the instruments list? Thank you!!!!!

Return to “Estimation”

Who is online

Users browsing this forum: Google [Bot] and 6 guests