Introduction to Econometrics 3rd Edition by James Stock, Mark Watson

تمرين 11

Consider a product market with a supply function
a demand function
and a market equilibrium condition
where
are mutually independent i.i.d. random variables, both with a mean of zero.
a. Show that P, and
are correlated.
b. Show that the OLS estimator of ß 1 is inconsistent.
c. How would you estimate ß 0 , ß 1 , and 0