## 3SLS: Three-Stage Least Squares

The Three-Stage Least Squares or 3SLS is applied to simultaneous equation models. It is different from single equation methods like Indirect Least Squares (ILS) and 2SLS because it is applied…

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# 2SLS

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3SLS: Three-Stage Least Squares

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Indirect Least Squares Estimation

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Identification: Rank and Order Conditions

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Simultaneous Equation Bias

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Test of Overidentifying Restrictions: Sargan Test

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Two-Stage Least Squares (2SLS) Estimation

The Three-Stage Least Squares or 3SLS is applied to simultaneous equation models. It is different from single equation methods like Indirect Least Squares (ILS) and 2SLS because it is applied…

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January 20, 2023

The Indirect Least Squares (ILS) is a method used to estimate simultaneous equation models that are exactly identified. Moreover, it is a single equation method because it is applied to…

January 18, 2023

A simultaneous equation model is said to be identified if we can obtain unique estimates of the coefficients in the model. The equations in identified models have a unique structure…

January 16, 2023

The OLS and other single equation models assume that variables treated as independent variables are exogenous. This implies a one-way relationship between independent and dependent variables. It is assumed that…

January 11, 2023

The Sargan Test of Overidentifying Restrictions is applied to check the validity of the instruments used in simultaneous equation models. As the name suggests, it is applicable to overidentified model…

May 19, 2022

The Two-Stage Least Squares or 2SLS is used to estimate simultaneous equation models or system of equations. 2SLS uses a single equation approach. This means that each equation in the…

May 18, 2022