The SIMLIN Procedure

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.