Limitations of simple regression model:

Dec 16, 2024

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Explore the intricacies of simultaneous equations and causal models with reciprocal effects involving price, demand, income, wages, and more. Dive into path diagrams and analyses, including SEM and Monte Carlo data simulations. Understand the limitations of OLS regression in SEM analyses. 8

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Limitations of simple regression model:

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Limitations of simple regression model: Simultaneous equations
Causal model with reciprocal effects W I U2 U1 P = price D = demand I = Income W = Wages + D P -
True value a=-.2 Path Diagram V2 * a Y1 Y2 Y3 Y4 Y5 Y6
Example SEM, Monte Carlo data /MATRIX 2.5123 0.9345 0.5414 1.4768 0.4544 1.5910 2.1110 0.6925 1.4842 2.1037 1.5067 0.5093 0.5278 1.4727 1.5566 0.3683 0.4155 -0.0683 0.0235 0.0847 0.9376 n = 500
Standard OLS regression
SEM analysis
Simultaneous Equations

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