Simultaneous equations present a challenge because OLS estimates
A)do not properly weight the data for the undue influence of outliers.
B)do not account for the autoregressive structure of the error term.
C)treat the dependent variable as a continuous variable.
D)are biased because one or more right hand side variables from each equation are correlated with the error term due to the equations being jointly determined.

Question

Quizplus · Accepted Answer

Simultaneous equations are jointly determined, so one or more right-hand side variables from each equation may be correlated with the error term, causing bias in OLS estimates.

Simultaneous Equations Present a Challenge Because OLS Estimates