Consider the following 2SLS model:
Y= b0 +b1X1+b2X2+θ1Ψ1+θ2Ψ2+e
Where:
Y represents the dependent variable,
X1, X2 denote the endogenous variables,
Ψ1,Ψ2 represent the exogenous variables.
To address endogeneity in the model, a set of four instruments, is introduced. Two
instruments (Z1 and Z2) are employed to instrument for X1, while two other instruments (Z3
and Z4) are used to instrument for X2.
My question is: How Gretl understand which instrument stands for which endogenous
variable?