Which of the following statements is true?
A)White test can be used to efficiently determine the presence of serial correlation in panel data.
B)The t statistic is not an efficient test to determine serial correlation in panel data.
C)Instrumental variables for both endogenous and exogenous variables are required for estimating simultaneous equation models concerned with panel data.
D)2SLS should be applied to simultaneous equation models with panel data only after removing the unobserved effects from the equations of interest.

Question

Quizplus · Accepted Answer

2SLS should be applied to simultaneous equation models with panel data only after removing the unobserved effects from the equations of interest. This is because 2SLS assumes that the instrument variables used are uncorrelated with the error term and if the unobserved effects are not removed, they may be correlated with the instrument variables. A, B, and C are all incorrect statements. White test is used to determine heteroscedasticity in panel data, t statistic can be used to determine serial correlation in panel data, and instrumental variables are only required for endogenous variables in simultaneous equation models concerned with panel data.

Which of the Following Statements Is True