# Answer to Question #47155 in Macroeconomics for Nara

Question #47155

Suppose that an endogenous variable yt is related to two exogenous shocks:

yt=α*ε_t+β*η_t

where alpha and beta are positive parameters and ε_t~iidN(μ_ε,σ^2_ε)/ η_t~iidN(μ_η,σ^2_η)

cov(ε_t, η_t)=0. eqsilon and eta are unobservable.

(1) are all the parameters(alpha, beta, mus, sigmas) identified?

(2) suppose that alpha=beta=1 and that we can observe another variable x_t=η_t.

can we identify the remaining parameters?

(3) suppose that y is not observed. with the information in (2), what is E(y|x)?

yt=α*ε_t+β*η_t

where alpha and beta are positive parameters and ε_t~iidN(μ_ε,σ^2_ε)/ η_t~iidN(μ_η,σ^2_η)

cov(ε_t, η_t)=0. eqsilon and eta are unobservable.

(1) are all the parameters(alpha, beta, mus, sigmas) identified?

(2) suppose that alpha=beta=1 and that we can observe another variable x_t=η_t.

can we identify the remaining parameters?

(3) suppose that y is not observed. with the information in (2), what is E(y|x)?

Expert's answer

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