Changing Slopes in Scenario Simulations

[donihue]

My question is whether (and if so, how) one can change a parameter (an "@coef") in an estimated equation used in creating a model, so as to simulate, for example, a change in an (estimated) tax rate. Add factors do not work as they do not affect slopes, but only intercepts, so far as I can make out.

For example, I have in the model an equation "tax = @coef(1) + @coef(2) * gdp + [ar(1) = @coef(3)]" and wish to change @coef(2) in a simulation scenario

Many thanks
Donihue

[EViews Chris]

There's probably a few different approaches to what you're trying to do.

Add factors are really just extra exogenous variables in the model with some additional support functions. You can always add more general exogneous variables yourself if you need a different specification.

One approach would be to define a new series called something like 'gdpslope' initialized to 1.0 throughout your workfile.

You can then estimate the model:

tax = @coef(1) + @coef(2) * (gdpslope * gdp) + [ar(1) = @coef(3)]

You can then change gdpslope to a new value (like 1.1) during the model simulation to try out different values of the coefficient on gdp.

[donihue]

Thanks! That does the job perfectly.
Regards
Donihue