Abstract
In this chapter we turn our attention from point estimation of the structural coefficients of a simultaneous equations model to the efficient estimation of the reduced form equation Y = X II + V and its use for forecasting future values of the endogenous variables given values (either known or forecasted) of the predetermined variables. Assuming the appropriateness of the initial model specification, efficient estimation requires the utilization of all available information. As we shall see, the ordinary least squares estimator, \( \hat \Pi = \left( {X'X} \right)^{ - 1} X'Y \), of the reduced form parameters does not utilize all available information and as a result there exist more efficient ways to estimate Π. Such methods are discussed in Section 23.2.
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© 1984 Springer Science+Business Media New York
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Fomby, T.B., Johnson, S.R., Hill, R.C. (1984). Reduced Form Estimation and Prediction in Simultaneous Equations Models. In: Advanced Econometric Methods. Springer, New York, NY. https://doi.org/10.1007/978-1-4419-8746-4_23
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DOI: https://doi.org/10.1007/978-1-4419-8746-4_23
Publisher Name: Springer, New York, NY
Print ISBN: 978-0-387-96868-1
Online ISBN: 978-1-4419-8746-4
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