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squares will be inconsistent for at least one equation in the 
model. 
What is less often realized in practice is the role played by 
the assumptions on the disturbances. Because of the simplicity 
and other advantages of ordinary least squares, there is a na- 
tural tendency to settle for a triangular A and to overlook the 
fact that such triangularity does not suffice to make ordinary 
least squares consistent (%). 
To see that such assumptions are generally required, con- 
sider first the assumption that V(o) is diagonal. If this fails, 
then (2.5) shows that W(0) cannot generally be taken to be 
triangular, whence ordinary least squares will be inconsistent. 
This corresponds to the intuitive idea that if a high-numbered 
and a low-numbered disturbance are correlated, the endogenous 
variable corresponding to the low-numbered disturbance can- 
not be taken to be uncorrelated with the high-numbered disturb- 
ance even if thre is no direct influence through the explicit 
equations of the model. Indeed, not only is the diagonality of 
V(o) required for the consistency of ordinary least squares, 
but also, if nothing more is known of the coefficients of the 
model save that A is triangular, such an assumption is neces- 
sary for the very identifiability of the equations (°). 
It is possible, however, to alter the assumption of no serial 
correlation. Clearly, this enters in both (2.5) and (2.6) because 
y,_ appears in the model. If this were not the case, the as- 
sumption in question would not be needed for consistency. 
In most econometric models, however, and certainly in eco- 
nomy-wide ones, lagged values of the endogenous variables do 
in fact appear. We are nevertheless able to weaken the no- 
serial-correlation assumption (R.3) to: 
(R.3*) B (as well as A) is triangular with zeros above 
the diagonal, and for all 0>o, V(0) is triangular with the same 
arrangement of zeros so that high-numbered disturbances are 
() In fairness, it should be pointed out that Worp’s theoretical writings 
are entirely clear on this point. See Worp 36, pp. 358-359], for example. 
(®) See F1sHER [10] 
‘6] Fisher - pag. 8