clear

drawnorm e1, n(1000)
drawnorm mu mu1 x1 x3

gen e2=.8*e1+.6*mu
//gen x1=uniform()
gen x2=uniform()
//gen x3=uniform()
gen x4=x2+mu1/2

scalar c1=5
scalar c2=-5
scalar a1=1
scalar a2=2
scalar b1=-3
scalar b2=0.5
scalar g1=-1
scalar g2=-0.5

gen y1=c1+a1*x1+a2*x2+e1
gen y2=c2+b1*x3+b2*x4+g1*y1+e2

reg y1 x1 x2 x3 x4
predict y1_hat
reg y2 x3 x4 y1_hat
ivregress 2sls y2 x3 x4 (y1 = x1 x2)