Date: Sun, 29 Aug 2010 14:20:27 -0000
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From: EST <est2010@REDIFFMAIL.COM>
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Please somebody help me finding answers for the following questions:
I am using Simultaneous Equations Model (2 equations) and trying to
estimate using Generalized Method of Moments (GMM) (I will use 2-step
GMM or may be iterated GMM). In one equation, I have a binary
endogenous regressor and continuous dependent variable. In my other
equation, I have a continuous endogenous regressor and a binary
dependent variable. For example,
Eq1) Y=a0+a1*X+e1; where Y is continuous and X is binary.
Eq2) X=b0+b1*Y+e2; where X is binary and Y is continuous.
All my instruments for X & Y are dummy variables.
Can I use GMM estimation method in estimating the above 2 equations?
Do you think, Dummy instruments with binary regressor will work?
Please, please help me.
Thank you in advance.