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On the Specification and Estimation of Large Scale Simultaneous Structural Models

In: Modern Econometric Analysis

Author

Listed:
  • Pu Chen

    (University of Bielefeld)

  • Joachim Frohn

    (University of Bielefeld)

Abstract

This paper surveys the state of the art of the analysis and application of large scale structural simultaneous econometric models (SSEM). First, the importance of such models in empirical economics and especially for economic policy analysis is emphasized. We then focus on the methodological issues in the application of these models like questions about identification, nonstationarity of variables, adequate estimation of the parameters, and the inclusion of identities. In the light of the latest development in econometrics, we identify the main unsolved problems in this area, recommend a combined data-theory-driven procedure for the specification of such models, and give suggestions how one could overcome some of the indicated problems.

Suggested Citation

  • Pu Chen & Joachim Frohn, 2006. "On the Specification and Estimation of Large Scale Simultaneous Structural Models," Springer Books, in: Olaf Hübler & Jachim Frohn (ed.), Modern Econometric Analysis, chapter 2, pages 7-24, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-32693-9_2
    DOI: 10.1007/3-540-32693-6_2
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    References listed on IDEAS

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    1. Zellner, Arnold & Palm, Franz, 1974. "Time series analysis and simultaneous equation econometric models," Journal of Econometrics, Elsevier, vol. 2(1), pages 17-54, May.
    2. Brown, Bryan W, 1983. "The Identification Problem in Systems Nonlinear in the Variables," Econometrica, Econometric Society, vol. 51(1), pages 175-196, January.
    3. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    4. Breitung, J., 1995. "A Simultaneous Equations Approach to Cointegrated Systems," SFB 373 Discussion Papers 1995,46, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    5. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    6. Cheng Hsiao, 1997. "Cointegration and Dynamic Simultaneous Equations Model," Econometrica, Econometric Society, vol. 65(3), pages 647-670, May.
    7. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    8. Olivier Blanchard, 2000. "What Do We Know about Macroeconomics that Fisher and Wicksell Did Not?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(4), pages 1375-1409.
    9. Brown, Bryan W, 1985. "The Identification Problem in Simultaneous Equation Models with Identities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(1), pages 45-66, February.
    10. Hendry, David F., 1995. "Dynamic Econometrics," OUP Catalogue, Oxford University Press, number 9780198283164.
    11. Johansen, Soren, 1992. "Testing weak exogeneity and the order of cointegration in UK money demand data," Journal of Policy Modeling, Elsevier, vol. 14(3), pages 313-334, June.
    12. Christopher A. Sims, 1982. "Policy Analysis with Econometric Models," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(1), pages 107-164.
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    Cited by:

    1. Walter Krämer, 2016. "Interview mit Joachim Frohn," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer;Deutsche Statistische Gesellschaft - German Statistical Society, vol. 10(4), pages 325-333, December.
    2. Antonio Oliva & Francesco Gracceva & Daniele Lerede & Matteo Nicoli & Laura Savoldi, 2021. "Projection of Post-Pandemic Italian Industrial Production through Vector AutoRegressive Models," Energies, MDPI, vol. 14(17), pages 1-18, September.

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