[R] simultaneous equation model with endogenous interaction terms

[Janka Vanschoenwinkel]

Dear list members,

I am building a model such as:

Y1 = Y2*X1 + X2
Y2 = Y1*X1 + X2

X2 is the exogenous variable
Z1 is the instrument of Y1
Z2 is the instrument of Y2

This is a simultaneous equation model. I know how to build a simultaneous
equation model without interaction terms:

library(systemfit)
eq1 <- Y1~Y2+X2+Z2
eq2 <- Y2~Y1+X2+Z1
inst <- ~X2+Z1+Z2
system <- list(eq1=eq1, eq2=eq2)
reg2SLS <-systemfit(system, "2SLS", inst=inst, data=mydata)
summary(reg2SLS)



I also know how to do a normal 2SLS with interaction terms:
library(systemfit)
ivreg(Y1~Y2*X1 | Z2*X1, data= Alldata)



However, I don't know how to deal with the interaction terms in the
simultaneous equation model.

I am experimenting both with R and STATA to see which formulation gives the
same result in both softwares, but until know without success.

Could somebody help me with this?

Thank you very much!

Janka

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