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

124 PONTIFICIAE ACADEMIAE SCIENTIARVM SCRIPTA VARIA - 28 this does not suffice for the existence of the probability limit), the effects of serial correlation will not die out (or will die out only slowly) as we consider longer and longer lags. The con- clusion seems inescapable that if the model is thought to be unstable (and the more so, the more unstable it is), the use of lagged endogenous variables as instruments anywhere in an indecomposable dynamic system with serially correlated disturbances is likely to lead to large inconsistencies at least for all but very high lags. The lower is serial correlation and the closer the model to stability, the less dangerous is such use. Is the stability assumption a realistic one for economy-wide models, then? I think it is. Remember that what is at issue is not the ability of the economy to grow, but its ability to grow (or to have explosive cycles) with no help from the exogen- ous variables and no impulses from the random disturbances. Since the exogenous variables generally include population growth and since technological change is generally either treated as a disturbance or as an effect which is exogenous in some way, this is by no means a hard assumption to accept. While there are growth and cycle models in economic theory which involve explosive systems, such models generally bound the explosive oscillations or growth by ceilings or floors which would be constant if the exogenous sources of growth were constant (*). The system as a whole in such models is not unstable in the presence of constant exogenous variables and the absence of random shocks (#). We shall thus continue to make the stability assumption. Even when the stability assumption is made, however, it may not be the case, as we have seen, that one is willing to take the expression in (5.25) as negligible for all 8>>1. (In particular, this will be the case if serial correlation is thought to be very high so that the diagonal elements of A are close (*) See, for example, Hicks [13] and Harrop [12]. (*) Whether a linear model is a good approximation if such models are realistic is another matter 61 Fisher - pag. 40

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