ABSTRACT
The crux of the identification problem is whether or not unique values can be obtained for all the coefficients in the structural equations from the estimated reduced-form equations. It is apparent that the identification problem is directly linked to the number of distinct exogenous variables included in the structural equations. The problems involved in estimating simultaneous equation systems are clearly complex. In the first place it must be ensured that the individual equations can be identified. Secondly, an appropriate method of estimation has to be chosen, bearing in mind that ordinary least squares (OLS) will give biased and inconsistent estimates. The various tests and statistics employed for the purpose of analysing econometric results were designed for the use of the OLS method and do not possess the same properties when other methods of estimation are used.
