Full text: Study week on the econometric approach to development planning

viable, in this case the interest rate, say g. In symbols, let the 
two behavioural relations be 
30a-b)  S,=L(q,, z)+ v, With E(S,lg, z,)= L(g, 2,) 
(3ra-b) I, = L,(q,, Z;) +U ; » E (Llg, 2) — L,(q, Z;) 
where for simplicity we have assumed that g, is the only cur- 
rent endogenous variable that influences S, and I,. Further let 
M, denote the common total of savings and investment, 
Then under general conditions of regularity we may substi- 
tute (30a) and (31a) into (32) and solve for the equilibrating 
variable, say 
g,=L,(z,)+ v, 
Thus we may regard (32) as an impliéit and (33) as an explicit 
behavioural relation for the equilibrium variable g,. Now with 
regard to the rationale of the generalization from CC- to ID- 
systems the following points will be noted. 
The assumptions (30)-(31) make two behavioural relations 
for the endogenous variable M,, and no explicit behavioural 
relation for the endogenous variable g, and this situation is 
incompatible with the general design (10) of CC-systems. This 
is so even if the eo ipso predictor specifications (30b) and (31b) 
are abandoned. In this connection it is important to note that 
if specifications (30b) and (31b) are adopted, relations (30)-(31) 
E(q,|2,)Æ L3(2,) 
showing that relation (33) cannot be specified so as to make 
an eo ipso predictor. 
Wold - pag. 16

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