Computing the Reduced Form :: SAS/ETS(R) 12.1 User's Guide

Computing the Reduced Form

First, the SIMLIN procedure computes reduced form coefficients by premultiplying by $\mb {G} ^{-1}$ :

$\mb {y} _{t}=\mb {G} ^{-1}\mb {C} \mb {y} ^{L}_{t}+\mb {G} ^{-1}\mb {B} \mb {x} _{t}$

This can be written as

$\mb {y} _{t}={\Pi }_{1} \mb {y} ^{L}_{t}+{\Pi }_{2}\mb {x} _{t}$

where ${\Pi }$ $_{1}$ = $\mb {G} ^{-1}$ C and ${\Pi }$ $_{2}$ = $\mb {G} ^{-1}$ B are the reduced form coefficient matrices.

The reduced form matrices ${\Pi }$ $_{1}$ = $\mb {G} ^{-1}$ C and ${\Pi }$ $_{2}$ = $\mb {G} ^{-1}$ B are printed unless the NORED option is specified in the PROC SIMLIN statement. The structural coefficient matrices G, C, and B are printed when the ESTPRINT option is specified.

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The SIMLIN Procedure

Computing the Reduced Form