Understanding Simultaneous Models in Macroeconometrics: Theory and Practice
This resource delves into the essential aspects of simultaneous models in macroeconometrics, shedding light on their necessity and applications. It reviews empirical approaches without time dimensions, the Klein model as a practical example, and how to utilize STATA for effective results. The material covers various types of equations—behavioral and equilibrium—alongside distinctions between endogenous and exogenous variables. It also addresses common data issues, the importance of instrumental variables, and different estimation techniques such as 3SLS and 2SLS.
Understanding Simultaneous Models in Macroeconometrics: Theory and Practice
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Presentation Transcript
MACROECONOMETRICS LAB 2 – SIMULTANEOUS MODELS
ROADMAP • What do we need simulteneous models for? • What you know from the lecture • Empirical side (w/o time dimension, really!) • How to get the NEEDED results from STATA • Klein model (example) How to do own structural research?
Simultaneous Equations Models • Much of the theory based on systems of equilibrium equations: • D+S & market equilibrium • small macroeconomic model (C, I, AD) • Types of equations: • behavioural • equilibrium (identities – no disturbances!) • Types of variables: • egxogenous • endogenous • predetermined PROBLEMS!!!
Simultaneous Equations Models • Data problem • if endogenous, OLS inconsistent • if autoregressive, OLS unreliable (s.errors!) • Different solutions ( econometric assumptions) • Instrumental Variables • errors and exogenous variables uncorrelated • 3SLS • only simultaneous autocorrelation of errors • differentiated 3SLS
IV estimation • Equation by equation • cap gen wp_plus_wg = wp+wg • ivreg c (p L1.p wp_plus_wg=year g wg t L1.p k1 L1.x ) • ivreg wp (x L1.x year=year g wg t L1.p k1 L1.x) • ivreg i (p L1.p k1= year g wg t L1.p k1 L1.x)
3SLS estimation • reg3 (c L1.p p wp_plus_wg) (wp x L1.x year) (i p L1.p k1), endog(wp_plus_wg x p) exog(year g wg t) 2sls • reg3 (c L1.p p wp_plus_wg) (wp x L1.x year) (i p L1.p k1), endog(wp_plus_wg x p) exog(year g wg t) • reg3 (c L1.p p wp_plus_wg) (wp x L1.x year) (i p L1.p k1), endog(wp_plus_wg x p) exog(year g wg t) ireg3 • reg3 (c L1.p p wp_plus_wg) (wp x L1.x year) (i p L1.p k1), endog(wp_plus_wg x p) exog(year g wg t) sure
