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2sls with 2 simultaneous equations
Posted: Sun Apr 03, 2022 2:16 am
by AgentRose
Say I got 2 equations:
(1) Y1 = Alpha + Y2 + AX1 + BX2 + CX3 + E
(2) Y2 = Beta + Y1 + DX4 + BX2 + FX5 + GX6 + U
How would you do the 2sls? I keep getting singular matrix error messages or insufficient instrument variables?
I have been inputting equation 1 as model specification and X1, X2, X3, X4, X5, and X6 as the instruments, but keep getting error messages so I tried different things but still keep receiving errors or really unsure of the answers.
Re: 2sls with 2 simultaneous equations
Posted: Sun Apr 03, 2022 7:07 am
by startz
Show us the commands you use and maybe attach the EViews workfile.
Re: 2sls with 2 simultaneous equations
Posted: Sun Apr 03, 2022 7:31 am
by AgentRose
Show us the commands you use and maybe attach the EViews workfile.
Quick, Estimate Equation, 2sls
Equation specification: Y1 c Y2 + AX1 + BX2 + CX3 + E
Instruments: AXI BX2 CX3 DX4 FX5 GX6
I think I got near a singular matrix for this one. How are you meant to do 2sls when you got 2 simultaneous equations with 2 endogenous variables and 6 exogenous variables? The variable X2 get repeated in both equations, and the seconds' equation have more variables.
Re: 2sls with 2 simultaneous equations
Posted: Sun Apr 03, 2022 7:33 am
by AgentRose
Show us the commands you use and maybe attach the EViews workfile.
Quick, Estimate Equation, 2sls
Equation specification: Y1 c Y2 X1 X2 X3 + E
Instruments: XI X2 X3 X4 X5 X6
I think I got near a singular matrix for this one. How are you meant to do 2sls when you got 2 simultaneous equations with 2 endogenous variables and 6 exogenous variables? The variable X2 get repeated in both equations, and the seconds' equation have more variables.
Re: 2sls with 2 simultaneous equations
Posted: Sun Apr 03, 2022 7:35 am
by AgentRose
How do you let Eviews know which variables are endogenous and which variables are exogenous in tsls, and the variables that form the 2 equations?
Re: 2sls with 2 simultaneous equations
Posted: Sun Apr 03, 2022 7:37 am
by startz
Show us the commands you use and maybe attach the EViews workfile.
Quick, Estimate Equation, 2sls
Equation specification: Y1 c Y2 + AX1 + BX2 + CX3 + E
Instruments: AXI BX2 CX3 DX4 FX5 GX6
I think I got near a singular matrix for this one. How are you meant to do 2sls when you got 2 simultaneous equations with 2 endogenous variables and 6 exogenous variables? The variable X2 get repeated in both equations, and the seconds' equation have more variables.
Is the variable named X2 or BX2? When using EViews this way you don't need to include coefficient names or the error term or + signs.
Re: 2sls with 2 simultaneous equations
Posted: Sun Apr 03, 2022 11:32 am
by AgentRose
Show us the commands you use and maybe attach the EViews workfile.
Quick, Estimate Equation, 2sls
Equation specification: Y1 c Y2 + X1 + X2 + X3 + E
Instruments: XI X2 X3 X4 X5 X6
I think I got near a singular matrix for this one. How are you meant to do 2sls when you got 2 simultaneous equations with 2 endogenous variables and 6 exogenous variables? The variable X2 get repeated in both equations, and the seconds' equation has more variables.
Is the variable named X2 or BX2? When using EViews this way you don't need to include coefficient names or the error term or + signs.
Quick, Estimate Equation, 2sls
Equation specification: Y1 c Y2 X1 X2 X3
Instruments: XI X2 X3 X4 X5 X6
I think I got near a singular matrix for this one. How are you meant to do 2sls when you got 2 simultaneous equations with 2 endogenous variables and 6 exogenous variables? The variable X2 get repeated in both equations, and the seconds' equation has more variables.
I didn't put any signs, coefficient or error terms when inputting the variables on the Eviews screen
Re: 2sls with 2 simultaneous equations
Posted: Sun Apr 03, 2022 11:35 am
by AgentRose
How would you do it when there is an unequal number of variables in the two equations. I am sure the equation is over-identified so 2sls should work right, or at least produce some results from half the equation?
Re: 2sls with 2 simultaneous equations
Posted: Sun Apr 03, 2022 11:42 am
by startz
That looks correct. So it's probably a problem with your data.
Re: 2sls with 2 simultaneous equations
Posted: Sun Apr 03, 2022 4:46 pm
by AgentRose
That looks correct. So it's probably a problem with your data.
Could it not be something to do with the second equation having 1 additional variable compared to equation 1 or that the variable X2 exists in both equations?
Re: 2sls with 2 simultaneous equations
Posted: Sun Apr 03, 2022 5:13 pm
by startz
That looks correct. So it's probably a problem with your data.
Could it not be something to do with the second equation having 1 additional variable compared to equation 1 or that the variable X2 exists in both equations?
Nope. The former means that the first equation is overidentified and the latter means that X2 is exogenous and serving as its own instrument. Both are fine for 2sls.
Re: 2sls with 2 simultaneous equations
Posted: Mon Apr 04, 2022 3:04 am
by AgentRose
That looks correct. So it's probably a problem with your data.
Could it not be something to do with the second equation having 1 additional variable compared to equation 1 or that the variable X2 exists in both equations?
Nope. The former means that the first equation is overidentified and the latter means that X2 is exogenous and serving as its own instrument. Both are fine for 2sls.
You were right! THANK YOU so MUCH!!
Re: 2sls with 2 simultaneous equations
Posted: Mon Apr 04, 2022 3:18 am
by AgentRose
For the first stage of the equations would you just input LS of the structural equation for equations 1 and 2 to get the F-stat or would you input the reduced form equation to get the F-stat?
Re: 2sls with 2 simultaneous equations
Posted: Mon Apr 04, 2022 6:11 am
by startz
For the first-stage F you want the reduced form.
Re: 2sls with 2 simultaneous equations
Posted: Mon Apr 04, 2022 5:20 pm
by AgentRose
For the first-stage F you want the reduced form.
Wouldn't you get the same generalised equation but like different letters instead?
How would you do it with so many variables? What difference does it make? Cause I did get an answer but I think I did it the structural formula way and get a low F-stat. Can you just straight up put equation 2 in the brackets with the rest of equation 1 and not simplify the equation further on Eviews?