EViews.com

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

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).

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

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.