[Gretl-users] strange R^2 with TSLS

[Allin Cottrell]

On Thu, 6 Dec 2007, Riccardo (Jack) Lucchetti wrote:

> I was just unaware of the fact that if the constant is in the 
> regressor list, it gets automatically added to the instrument 
> list if not already present...
> 
> I think I can see Allin's reasoning here "how can the constant 
> be endogenous?", but I wonder if this is maybe going a little 
> too far in protecting the user from his own stupidity. I can't 
> imagine right now a practical situation when the constant needs 
> to be among the regressors but not among the instruments, but 
> hey, it's a free world.

I don't feel strongly about this, but my first reaction is that 
it's a low-cost convenience to the user, to add the constant to 
the list of instruments if it's among the regressors (and not 
already specified as an instrument).  If we're to remove this, 
we'd have to check that it doesn't break TSLS in the GUI.

I tend to think that if a user really wants to treat the constant 
as endogenous, s/he can go ahead and do the two stages of TSLS 
manually.

Allin.