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4 An Econometric Model

4 an econometric model The United States (US) Model .l Introduction The construction of an Econometric Model is described in this chapter. This Model is based on the theoretical Model in Chapter 3. and thus the discussion in this chapter provides an example ofthe transition from a theoretical Model to an Econometric Model . It will be clear, as stressed in Chapter 2, that this transition is not always very tight, and I will try to indicate where I think it is particularly weak in the present case. I have tried to maintain the three main features of the theoretical Model in the Econometric specifications, namely, the assumption of maximizing behavior, the explicit treatment of disequi- librium effects, and the accounting for balance-sheet constraints.

One of the equa- tions is redundant, and it is easiest to take Eq. 80 to be the redundant one. The 30 stochastic equations are discussed in Sections 4.1.4-4.1.9. The identities in the table are of two types. One type simply defines one variable in terms of others. ...

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