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Structural Models, Information and Inherited Restrictions

Author

Listed:
  • Andrew J. Buck

    (Department of Economics, Temple University)

  • George M. Lady

    (Department of Economics, Temple University)

Abstract

The derived structural estimates of the system beta Y = gamma Z | delta U impose identifying restrictions on the reduced form estimates ex post. Some or all of the derived structural estimates are presented as evidence of the model’s efficacy. In fact, the reduced form inherits a great deal of information from the structure’s restrictions and hypothesized sign patterns, limiting the allowable signs for the reduced form. A method for measuring a structural model’s statistical information content is proposed. Further, the paper develops a method for enumerating the allowable reduced form outcomes which can be used to falsify the proposed model independently of significant coefficients found for the structural relations.

Suggested Citation

  • Andrew J. Buck & George M. Lady, 2011. "Structural Models, Information and Inherited Restrictions," DETU Working Papers 1103, Department of Economics, Temple University.
    • Handle: RePEc:tem:wpaper:1103
    as

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    File URL: http://www.cla.temple.edu/RePEc/documents/detu_11_03.pdf
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    References listed on IDEAS

    as
    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    2. Buck, Andrew J. & Lady, George M., 2005. "Falsifying economic models," Economic Modelling, Elsevier, vol. 22(5), pages 777-810, September.
    3. Christopher A. Sims, 1986. "Are forecasting models usable for policy analysis?," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 10(Win), pages 2-16.
    4. Kelvin Lancaster, 1962. "The Scope of Qualitative Economics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 29(2), pages 99-123.
    5. Andrew J. Buck & George M. Lady, 2010. "An Expanded Scope For Qualitative Economics," DETU Working Papers 1007, Department of Economics, Temple University.
    6. Lady, George M. & Quirk, James P., 2007. "The scope of the LeChatelier Principle," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 381(C), pages 351-365.
    7. Leamer, Edward E, 1983. "Let's Take the Con Out of Econometrics," American Economic Review, American Economic Association, vol. 73(1), pages 31-43, March.
    8. George Lady, 2000. "Topics in nonparametric comparative statics and stability," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 6(1), pages 67-83, February.
    9. Kelvin Lancaster, 1966. "The Solution of Qualitative Comparative Static Problems," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(2), pages 278-295.
    10. Titus O. Awokuse & David A. Bessler, 2003. "Vector Autoregressions, Policy Analysis, and Directed Acyclic Graphs: An Application to the U.S. Economy," Journal of Applied Economics, Universidad del CEMA, vol. 6, pages 1-24, May.
    11. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    12. George Lady & James Quirk, 2010. "The global LeChatelier Principle and multimarket equilibria," Review of Economic Design, Springer;Society for Economic Design, vol. 14(1), pages 193-201, March.
    13. Gilbert, Christopher L, 1986. "Professor Hendry's Econometric Methodology," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 283-307, August.
    14. Lady, George M, 1983. "The Structure of Qualitatively Determinate Relationships," Econometrica, Econometric Society, vol. 51(1), pages 197-218, January.
    15. Ritschard, Gilbert, 1983. "Computable Qualitative Comparative Static Techniques," Econometrica, Econometric Society, vol. 51(4), pages 1145-1168, July.
    16. Gerrard, Bill, 1995. "The Scientific Basis of Economics: A Review of the Methodological Debates in Economics and Econometrics," Scottish Journal of Political Economy, Scottish Economic Society, vol. 42(2), pages 221-235, May.
    17. Hendry, David F, 1980. "Econometrics-Alchemy or Science?," Economica, London School of Economics and Political Science, vol. 47(188), pages 387-406, November.
    18. Lady, George M. & Maybee, John S., 1983. "Qualitatively invertible matrices," Mathematical Social Sciences, Elsevier, vol. 6(3), pages 397-407, December.
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    Cited by:

    1. Andrew J. Buck & George M. Lady, 2016. "Estimating a Falsified Model," DETU Working Papers 1601, Department of Economics, Temple University.
    2. Andrew J. Buck & George M. Lady, 2015. "A New Approach to Model Verification, Falsification and Selection," Econometrics, MDPI, vol. 3(3), pages 1-28, June.
    3. Andrew J. Buck & George M. Lady, 2015. "Estimating a Falsified Model: Some Impossibility Theorems," DETU Working Papers 1506, Department of Economics, Temple University.

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    More about this item

    Keywords

    Qualitative Analysis; Structural Form; Reduced Form; Identification; Model Falsification; Entropy;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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