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Hi, I'd like to get some knowledge on how to interpret this graph regarding the fitted values. The dependent variable is a binary variable as in the values are only 1 and 0. What can I say about autocorrelation or heteroskedasticity here? Or anything else?

You're asking good questions. It might be time to go do a little background reading on 2SLS and instrumental variables to get a better idea of what's going on.

I'll go do that. Thanks for the quick responses.

An idea of 2SLS is indeed that it adjusts for reverse causality, but the R^2 has nothing to do with it.

Look for "Hausman test" in the help files.

My supervisor specifically wants me to do a 2SLS-test but how do I interpret the difference between the OLS-results and 2SLS-results?

No. Serial correlation has nothing to do with 2SLS. I want to thank you for the quick responses, really appreciate it. I have a last question, so one image is with OLS and the other with 2SLS (using lagged variables of the independent variables as the instruments). How do I interpret the difference...

There's nothing wrong with a negative R-squared. Two-stage least squares--with valid instruments--does not prove anything about reverse causality. It "adjusts" for the effects of reverse causality. To see if reverse causality changes anything, consider using a Hausman test. Alright. Is it...

If your supervisor thinks these should be instruments, then that's where to put them.

So how does two-stage least squares prove that there is no reverse causality from Y to the X-variables? I did what you said, using lagged variables as instrument variables and I got a negative R-squared value.

Something like

tsls y c x1 x2 @ c x1(-1) x2(-1)

So using the lagged variables in the 'Instrument Variables section' ?

Hey guys, I have a regression equation in which the unemployment rate is the dependent variable and the independent variables are the oil price, exchange rate, export and two time dummy's. I'm required to check out if the unemployment rate does not have a causal effect on the dependent variables be...

Hey guys, I have a regression equation in which the unemployment rate is the dependent variable and the independent variables are the oil price, exchange rate, export and two time dummy's. I'm required to check out if the unemployment rate does not have a causal effect on the dependent variables bec...

Hey guys, I have trouble interpreting the results of a LS-estimation. All my independent variables are stationary. URATE (dependent variable) consists of the first differences from the raw data. Do I have to make the dependent variable stationary as well? (which it is now because of the first differ...

Dear reader,

When you do a LS-regression and look at the beta-coefficients, that's what happens to the dependent variable if the independent variable increases with 1 right? How can I estimate the beta-coefficient for an independent variable when it decreases with 1?

Kind regards,

Georgie