Question

From the model

Y1t = β10 + β12Y2t + γ11 X1t + u1t

Y2t = β20 + β21Y1t + γ22 X2t + u2t

the following reduced-form equations are obtained:

Y1t = π10 + π11 X1t + π12 X2t + wt

Y2t = π20 + π21 X1t + π22 X2t + vt

a. Are the structural equations identified?

b. What happens to identification if it is known a priori that γ11 = 0?​

Answer 1

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