![]() ![]() Such predicted values replace the right hand side endogenous variables in the model to obtain consistent estimates of the parameters.įormally, the N2SLS estimator is the value that minimizes the quantityĪ key assumption of N2SLS is that the disturbances are i.i.d. In such case, the nonlinear heteroscedastic 2SLS (NH2SLS) estimator is a single-equation estimator that attains a gain in efficency with respect to the N2SLS estimator by weighting observations with White's estimate of the error correlation matrix.įormally, the NH2SLS estimator is obtained by minimizing the following quantity: In the presence of heteroscedasticity, the 2SLS estimator is still consistent but no longer efficient. ![]() Where is a gk × gk block-diagonal matrix with each block j given by, for j = 1. Note that the NH2SLS can be interpreted as a GMM estimator where the variance of the moment function V is taken to be block-diagonal. Each block, corresponding to each single equation, is estimated using the residuals from the N2SLS estimates. Table 1.1: Summary of PROC MODEL Estimation Methods Method The following table illustrates the relationship among some commonly used estimation methods for simultaneous equation models. Where m n is first moment of the crossproduct. ![]()
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