LEVEL 10 · 40 MIN
Identification Crisis
Recover structural effects when markets determine variables together.
OPTIONAL ADVANCED EXTENSION — This mission sits outside the assessed FIN4401 core. Enter a market where price and quantity are jointly determined, OLS is compromised, and credible excluded shifters are the only route to structural evidence.
MISSION OBJECTIVES
- Recognise simultaneous systems and classify endogenous and exogenous variables.
- Explain simultaneous-equation bias and distinguish structural from reduced-form equations.
- Evaluate instrument relevance, exclusion, identification, and weak-instrument evidence.
- Execute and interpret a proper 2SLS workflow in EViews and Stata.
- Report IV results without treating diagnostics as proof of instrument validity.