I have two structural equations of the
Y1= a Y2+ b X1
Y2= c Y1+ d X2
I first estimated these two equations using OLS (i.e. ignoring
endogeneity). Next I estimated them using 2sls. Essentially what
happened was the endogeneous variables (Y2,Y1) changed signs (went
from positive significant to negative significant). I was wondering if
this was cause for concern. Does it reflect some underlying problems
with the data/ model? Or is this just an outcome of endogeneity? I
should mention 3sls produced coefficients with the same signs as 2sls.
Any insight would be much appreciated.