Hello:
I have a demand and supply model with several equations and I would like to know what happens when I exclude an endogenous variable that is an identity that aggregates components. For example:
Total Consumption = componentA+componentB+componentC
All the components are categorized as simultaneous equations. What does Eviews do to the components to make Total Consumption follow a specified path when excluded? Does it modify them proportionally perhaps?
Thanks in advance
LMGZ
Excluding Endogenous Variables
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Re: Excluding Endogenous Variables
If you exclude Total Consumption, then the model solve will do nothing to it. Whatever values are currently in Total Consumption are the values that will be used. It doesn't touch the components (unless they are also endogenous, in which case the model will solve their values from their respective equations).
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Re: Excluding Endogenous Variables
Thanks!
Yes, in this case they are also endogenous. To clarify my question, when the model solves the values for the components will it solve them in such a way that the identity of Total Consumption holds? In other words, if I sum the values of the solved components will I get the Total Consumption path I gave exogenously to the model?
If this is not the case, is there a way to make sure this happens?
Regards
LMGZ
Yes, in this case they are also endogenous. To clarify my question, when the model solves the values for the components will it solve them in such a way that the identity of Total Consumption holds? In other words, if I sum the values of the solved components will I get the Total Consumption path I gave exogenously to the model?
If this is not the case, is there a way to make sure this happens?
Regards
LMGZ
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- Fe ddaethom, fe welon, fe amcangyfrifon
- Posts: 13308
- Joined: Tue Sep 16, 2008 5:38 pm
Re: Excluding Endogenous Variables
No. What happens when you say you're excluding Total Consumption is that EViews ignores the equation (identity in this case) for Total Consumption and uses whatever values are in it.
If, and only if, you only have a single exogenous variable that affects Total Consumption (through the components), you could use the Proc->Solve Control for Target procedure.
If, and only if, you only have a single exogenous variable that affects Total Consumption (through the components), you could use the Proc->Solve Control for Target procedure.
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