ABSTRACT
Let us consider a set of G simultaneous equations: https://www.w3.org/1998/Math/MathML">Σj=1G YtjΓji+Σj=1K XtjΔji+εti=0 (i=1,2,⋯ ,G and t=1,2,⋯ ,T)https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9781003066958/a1a5d68a-642a-4424-8c7d-f14e7a129864/content/math356.tif" xmlns:xlink="https://www.w3.org/1999/xlink"/> Note that there are T observations; G equations determining the G endogenous variables https://www.w3.org/1998/Math/MathML">Yt1,⋯ ,YtG;https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9781003066958/a1a5d68a-642a-4424-8c7d-f14e7a129864/content/inline-math455.tif" xmlns:xlink="https://www.w3.org/1999/xlink"/> K predetermined variables https://www.w3.org/1998/Math/MathML">Xt1,⋯ ,XtK;https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9781003066958/a1a5d68a-642a-4424-8c7d-f14e7a129864/content/inline-math456.tif" xmlns:xlink="https://www.w3.org/1999/xlink"/> and a disturbance for each equation. It is assumed that the predetermined variables are either nonstochastic (exogenous) or lagged endogenous variables.
