Simulataneous equation system in supply and demand

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Consider the following system of simulataneous equation system in “supply and demand form”: y1 = γ1 + α2 y2 + β1z1 + u1 y2 = γ2 + α1 y1 + β2z2 + u2 (i) Is the above system identified? Show this using the order-condition for identification. (ii)If α1 ?=0,α2 ?=0, and α1 ?=α2,find the reduced form for y1 and y2. (iii) Show that the estimated reduced form parameters from (ii) can be used to solve for the parameters in the structural model in part (i). Derive these explicitly. (iv) Is the condition α1 = 0 or α2 = 0 enough to identify the system in (i) if there are NO z variables? Explain. (v) Explain how you would estimate the first equation in part (i).

Reference no: EM131112312

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