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On the interpretation of policy effects from estimates of simultaneous systems of equations

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  • George Ford
  • John Jackson

Abstract

The purpose of this paper is threefold: first, we warn analysts against the use of structural coefficient estimates alone for deducing quantitative inferences concerning many policy experiments. Second, we offer a potential solution to the problem by proposing a mutatis mutandis approach to deducing the 'full effect' of a policy change on the endogenous variables of the model. Finally, we show that this approach yields consistent estimates of the reduced form parameters, the true solution to the difficulty. An illustration is provided.

Suggested Citation

  • George Ford & John Jackson, 1998. "On the interpretation of policy effects from estimates of simultaneous systems of equations," Applied Economics, Taylor & Francis Journals, vol. 30(8), pages 995-999.
  • Handle: RePEc:taf:applec:v:30:y:1998:i:8:p:995-999 DOI: 10.1080/000368498325165
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    References listed on IDEAS

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    7. Mishkin, Frederic S, 1984. " Are Real Interest Rates Equal across Countries? An Empirical Investigation of International Parity Conditions," Journal of Finance, American Finance Association, vol. 39(5), pages 1345-1357, December.
    8. Campbell, John Y & Mankiw, N Gregory, 1990. "Permanent Income, Current Income, and Consumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(3), pages 265-279, July.
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    10. Mace, Barbara J, 1991. "Full Insurance in the Presence of Aggregate Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 928-956, October.
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    Cited by:

    1. Peter Calcagno & Monica Escaleras, 2007. "Party alternation, divided government, and fiscal performance within US States," Economics of Governance, Springer, vol. 8(2), pages 111-128, February.
    2. Mónica López-Puertas Lamy, 2012. "How does Ownership Structure Influence Bank Risk? Analyzing the Role of Managerial Incentives," Working Papers 1208, Departament Empresa, Universitat Autònoma de Barcelona, revised Nov 2012.
    3. Tatum, Shaun W. & Skinner, Sarah J. & Jackson, John D., 2010. "On the economic sustainability of ethanol E85," Energy Economics, Elsevier, vol. 32(6), pages 1263-1267, November.

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