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An Alternative Interpretation of Two-Stage Least Squares

The two-stage least squares simultaneous equation estimation procedure is shown to be identical to the modified two stage least squares estimator obtained by a) replacing the right-hand side endogenous variable in a single structural equation by their reduced form regression estimates; and b) running a generalized least squares or Aitken estimation procedure on the transformed equation.
Year of publication:
1975
Authors: Beach, Charles M. ; Prescott, David M.
Institutions: Economics Department, Queen's University
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Type of publication: Book / Working Paper
Notes:
1 pages long
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Persistent link: https://www.econbiz.de/10005688283
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