Structural Sign Patterns and Reduced Form Restrictions
This paper reconsiders the degree to which the sign patterns of hypothesized structural arrays limit the possible outcomes for the sign pattern of the corresponding estimated reduced form. To now, the conditions under which any such restrictions would apply were believed to be very narrow, are rarely found to apply, and are virtually never investigated. As a result, current practice does not test the structural hypothesis in terms of the outcome of the estimated reduced orm in terms of permissible reduced form sign patterns alone. This paper shows that such tests are always possible. Namely, that the sign patterns of the hypothesized structural arrays always limit the sign patterns that can be consistently taken on by the estimated reduced form. Given this, it is always possible to falsify a structural hypothesis based only upon the sign pattern proposed. Necessary conditions, algorithmic principles, and examples are provided to illustrate the analytic principle and the means of its application.
|Date of creation:||Jun 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.cla.temple.edu/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gillen, William J & Guccione, Antonio, 1990. "The Introduction of Constraints in Lancaster's Qualitative Comparative Statics Algorithm," The Quarterly Journal of Economics, MIT Press, vol. 105(4), pages 1053-61, November.
- 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.
- George Lady & James Quirk, 2010. "The global LeChatelier Principle and multimarket equilibria," Review of Economic Design, Springer, vol. 14(1), pages 193-201, March.
- Lady, George M. & Maybee, John S., 1983. "Qualitatively invertible matrices," Mathematical Social Sciences, Elsevier, vol. 6(3), pages 397-407, December.
- Andrew J. Buck & George M. Lady, 2010. "An Expanded Scope For Qualitative Economics," DETU Working Papers 1007, Department of Economics, Temple University.
- Buck, Andrew J. & Lady, George M., 2005. "Falsifying economic models," Economic Modelling, Elsevier, vol. 22(5), pages 777-810, September.
- Lady, George M, 1983. "The Structure of Qualitatively Determinate Relationships," Econometrica, Econometric Society, vol. 51(1), pages 197-218, January.
- 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. 0, pages 1-24, May.
- Ritschard, Gilbert, 1983. "Computable Qualitative Comparative Static Techniques," Econometrica, Econometric Society, vol. 51(4), pages 1145-68, July.
When requesting a correction, please mention this item's handle: RePEc:tem:wpaper:1102. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dimitrios Diamantaras)
If references are entirely missing, you can add them using this form.