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MACROECONOMETRICS LAB 2 – SIMULTANEOUS MODELS

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ROADMAP What do we need simulteneous models for? – What you know from the lecture – Empirical side (w/o time dimension, really!) How to get the NEEDED results from STATA Klein model (example) How to do own structural research?

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Simultaneous Equations Models Much of the theory based on systems of equilibrium equations: – D+S & market equilibrium – small macroeconomic model (C, I, AD) Types of equations: – behavioural – equilibrium (identities – no disturbances!) Types of variables: – egxogenous – endogenous – predetermined PROBLEMS!!!

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Simultaneous Equations Models Data problem – if endogenous, OLS inconsistent – if autoregressive, OLS unreliable (s.errors!) Different solutions ( econometric assumptions) – Instrumental Variables errors and exogenous variables uncorrelated – 3SLS only simultaneous autocorrelation of errors differentiated 3SLS

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IV estimation Equation by equation – cap gen wp_plus_wg = wp+wg – ivreg c (p L1.p wp_plus_wg=year g wg t L1.p k1 L1.x ) – ivreg wp (x L1.x year=year g wg t L1.p k1 L1.x) – ivreg i (p L1.p k1= year g wg t L1.p k1 L1.x)

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3SLS estimation reg3 (c L1.p p wp_plus_wg) (wp x L1.x year) (i p L1.p k1), endog(wp_plus_wg x p) exog(year g wg t) 2sls reg3 (c L1.p p wp_plus_wg) (wp x L1.x year) (i p L1.p k1), endog(wp_plus_wg x p) exog(year g wg t) reg3 (c L1.p p wp_plus_wg) (wp x L1.x year) (i p L1.p k1), endog(wp_plus_wg x p) exog(year g wg t) ireg3 reg3 (c L1.p p wp_plus_wg) (wp x L1.x year) (i p L1.p k1), endog(wp_plus_wg x p) exog(year g wg t) sure

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Lecture 1 Mathematical Framework of Economic Analysis

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