Explain the key assumptions of the random effects model and the kinds of transformations done in each model to handle the violations of assumptions and come up with efficient and consistent estimates.
Why is endogeneity an important identification condition for simultaneous equation models? (2 pts) Why is the probit model referred to as latent variable model? (2 pts) Consider the following extended Keynesian model of income determination: Consumption function: Ct=1+2Yt-3Tt+1t Investment Function: It=0+1Yt-1+2t Taxation Function: Tt=0+1Yt+3t Income Identity: Yt=C1+It+Gt Where, C consumption expenditure, Y income, I investment, … Read more