chapter_6_Otavio连立方程.pptVIP

Chapter 6 Multivariate models Simultaneous Equations Models  Models we have seen before were single equations models: y = X? + u All variables contained in X are assumed to be EXOGENOUS. y is an ENDOGENOUS variable. Example from economics - the demand and supply of a good: ? (1) (2) (3) ? where = quantity of the good demanded = quantity of the good supplied St = price of a substitute good Tt = variable embodying the state of technology Simultaneous Equations Models: The Structural Form Assuming that the market always clears (4) (5) This is a simultaneous STRUCTURAL FORM ? Price and quantity are determined simultaneously (price affects quantity and quantity affects price). ? P and Q are endogenous variables, while S and T are exogenous. ? We can obtain REDUCED FORM equations corresponding to (4) and (5) by solving equations (4) and (5) for P and for Q. Obtaining the Reduced Form Solving for Q, (6) ? Solving for P, (7) ? Rearranging (6), ? ? ? (8) ? Obtaining the Reduced Form (cont’d) Multiplying (7) through by ??, ? ? ? ? (9) ? ? (8) and (9) are the REDUCED FORM EQUATIONS for P and Q. Simultaneous Equations Bias ? What happens if we estimate equations (4) and (5), i.e. the structural form equations, using OLS? ? Both equations depend on P. One of the OLS assumptions was that E(X?u) = 0, where X is a matrix containing all the independent variables. ? It is clear from (8) that P is related to the errors in (4) and (5) - i.e. it is stochastic. ? What are the consequences for the OLS estimator if we ignore the SIMULTANEITY? ? Simultaneous Equations Bias (cont’d) Recall that and ? So that ? Taking expectations, ? If the X’s are non-stochastic, E(X?u) = 0, so that , i.e. b is unbiased But if the equation is part of a system, then X is stochastic, so that E(X?u) ? 0. Simultaneous