Re: [Gretl-users] Help on simultaneousus equation model
On Mon, 7 Mar 2011, Lemma Tenessa wrote:
Thanks so much for your kind and informative response on my question
entitled *“**Help on simultaneousus equation model”***
In this regard I have got sufficent answers on the questions I asked you.
Nevertheless, I still want your suggestions on predicted probabilities and
their application to reduced form equations and if there is that sort of
application in GRETL.
I understand now GRETL does not predict probabilities rather give us fitted
or residual values after we estimate an ordered probit model and ask the
program to generated predicted values.
After estimating an ordered probit you can use the "fcast"
command to generate a series of predictions for the ordinal
dependent variable. I guess that in a two-stage procedure you
would replace the actual ordinal values of your P and D variables
with the first-stage predictions.
However, I don't know if applying ordered probit again at a second
step would give you any kind of consistent estimator. You may be
better approaching this as a maximum likelihood problem (see
gretl's "mle" command).
What you're asking here is not really specific to gretl. You'll
need to examine the literature on IV methods as applied to the
sort of data you have. It looks as if these references might be
useful:
Andrew Chesher, "Instrumental Variable Models for Discrete
Outcomes", http://www.econ.uiuc.edu/~roger/seminar/Chesher.pdf
Skrondal, A. and Rabe-Hesketh, S. (2004). Generalized latent
variable modeling: Multilevel, longitudinal and structural
equation models (Chapman & Hall).
Allin Cottrell