Two Stage Least Squares is calculated as follows:
Group of answer choices
in the first stage, Y is regressed on the exogenous variables only. The predicted value of Y is then regressed on the instrumental variables in the second stage.
in the first stage, the exogenous variables are regressed on the instruments. The predicted value of the exogenous variables is then used in the second stage, together with the instruments, to predict the dependent variable.
in the first stage, the regression of the endogenous variable on the instruments is estimated by OLS, and the predicted values are calculated; in the second stage, Y is regressed on these predicted values and the other exogenous variables.
in the first stage, all the regressors are regressed on the instruments, and the predicted values are calculated. In the second stage, Y is regressed on these predicted values.