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# Re: Re: Re: RE: re:Re: st: Multiple endogenous regressors

 From Yuval Arbel To statalist@hsphsun2.harvard.edu Subject Re: Re: Re: RE: re:Re: st: Multiple endogenous regressors Date Sat, 22 Oct 2011 10:34:30 +0200

```I would like to assure you that I would not write about this matter if
I was not certain about my knowledge in this area.

I believe you are confusing between 2SLS and IV estimators, which are
not exactly the same:

When you are talking about 2SLS you need literally to replace
projected values from the solution equation - but here the second
equation is simply an identity, so you cannot produce here projected
values. I suppose what STATA did here is to use investment as
instrumental variable to consumption in the right-hand-side of the
consumption function. This is not 2SLS even if the command is 2SLS and
even if the output tells otherwise!!!

On Fri, Oct 21, 2011 at 9:51 PM, Christopher Baum <kit.baum@bc.edu> wrote:
> <>
> Yuval said
>
> Moreover, take for example the following system of Kensian (sic) equations:
>
> C=a+bY+u
> Y=C+I
>
> Note, that the only way to get consistent estimates in this case is by
> the ILS (you cannot employ here the 2SLS)
>
>
> I''m sure the inability to use 2SLS on a simple Keynesian model will come as a surprise to those of us who write econometrics lecture notes and textbooks, as it is one of the most common textbook examples of IV.
> An empirical counterexample:
>
> . webuse klein
>
> . ivregress 2sls consump (totinc = invest)
>
> Instrumental variables (2SLS) regression               Number of obs =      22
>                                                       Wald chi2(1)  =   24.24
>                                                       Prob > chi2   =  0.0000
>                                                       R-squared     =  0.8430
>                                                       Root MSE      =  2.8442
>
> ------------------------------------------------------------------------------
>     consump |      Coef.   Std. Err.      z    P>|z|     [95% Conf. Interval]
> -------------+----------------------------------------------------------------
>      totinc |   .4593425   .0932901     4.92   0.000     .2764971    .6421878
>       _cons |   26.07967   5.571562     4.68   0.000     15.15961    36.99973
> ------------------------------------------------------------------------------
> Instrumented:  totinc
> Instruments:   invest
>
>
> Apparently Yuval did not take my response to his point (4) too seriously.
>
> Kit
>
> Kit Baum   |   Boston College Economics & DIW Berlin   |   http://ideas.repec.org/e/pba1.html
>                             An Introduction to Stata Programming  |   http://www.stata-press.com/books/isp.html
>  An Introduction to Modern Econometrics Using Stata  |   http://www.stata-press.com/books/imeus.html
>
>
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>

--
Dr. Yuval Arbel