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Endogenous and Exogenous variables
Posted: Mon Jan 13, 2025 4:21 am
by EF00
I have two OLS equations for the dependent variables X and Y. In the equation for X, Y is one of the explanatory variables, and in the equation for Y, X is one of the explanatory variables. Both equations pass the tests for heteroscedasticity and autocorrelation. Can I keep these two equations in my model (model_base within model_solve)?
Thanks!!
Re: Endogenous and Exogenous variables
Posted: Mon Jan 13, 2025 1:51 pm
by startz
Autocorrelation and heteroskedasticity have nothing to do with endogeneity.
You almost certainly cannot estimate both equations by OLS.
Re: Endogenous and Exogenous variables
Posted: Tue Jan 14, 2025 1:08 am
by EF00
Thank you for your clarification. Do you have any recommendations (alternative methods like IV) ?
Re: Endogenous and Exogenous variables
Posted: Tue Jan 14, 2025 6:55 am
by startz
IV would make sense.