Study week on the econometric approach to development planning

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Monograph

Identifikator:: 1824422792

URN:: urn:nbn:de:zbw-retromon-217476

Document type:: Monograph

Title:: Study week on the econometric approach to development planning

Place of publication:: Amsterdam [u.a.]

Publisher:: North-Holland Publ. Co. [u.a.]

Year of publication:: 1965

Scope:: XLVII, 1259 S.; graph. Darst.

Digitisation:: 2022

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: Dynamic structure and estimation in economy-wide econometric models / FranklinM. Fisher, Massachuetts Institute of Technology - Cambridge, Mass. - U.S.A.

Collection:: Economics Books

SEMAINE D'ÉTUDE SUR LE ROLE DE L’ANALYSE ECONOMETRIOUE ETC. 400 the circumstances under which such choices are likely to be appropriate. Most of our discussion will be in terms of the assumptions that must be approximately satisfied if a given variable is to be eligible for inclusion as an instrument. We thus postpone to the next section the important question of how the eligible candidates ought in fact to be used. Until further notice, then, we discuss only whether and under what circumstances a given single variable ought to be treated as predetermined. In general, we desire two things of a variable which is to be treated as predetermined in the estimation of a given equa- tion. First, it should be uncorrelated in the probability limit with the disturbance from that equation; second, it should clo- sely causally influence the variables which appear in that equation and should do so independently of the other prede- termined variables (®¥). If the first criterion is not satisfied, treating the variable as predetermined results in inconsistency; if the second fails, such treatment does not aid much in estim- ation — it does not reduce variances. In practice, these requi- rements may frequently not be consistent and one has to com- promise between them. The closer the causal connection the higher may be the forbidden correlation. Thus, in one limit, the use of ordinary least squares which treats all variables on the right-hand side of the equation as predetermined perfectly satisfies the second but not the first criterion. In the other limit, the use of instrumental variables which do not directly or in- directly causally influence any variable in the model perfectly meets the first requirement but not the second (3%). In general, one is frequently faced with the necessity of weakening the first requirement to one of low rather than of zero correlation and {(*) It should therefore be relatively uncorrelated with the other va- riables used as instruments so that lack of collinearity is not really a separate criterion. We shall return to this in the next section. (*) If only such variables are available for use (or if an insufficient number of more interesting ones are) then the equation in question is underidentified and even asymptotic variances are infinite. Fisher - pag. 25

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