THE PURPOSE OF THIS PAPER is threefold: (i) to provide a unified iterative generalized least squares approach for computing FIML estimates for both linear and nonlinear simultaneous equations models of medium size (containing about 50 parameters in the nonlinear case and 75 in the linear case); (ii) to suggest a useful procedure to determine the length of the step to be made at each iteration of the algorithm; (iii) to report on numerical results which illustrate the robustness and the relative efficiency of the proposed method.
[A choice function C on X identifies, for each subset Y of X, a set C(Y) of "best" alternatives in Y. A. computationally viable choice function is one for which a member of the choice set C(Y) can be located by a computational procedure which does not waste time, generates reasonably satisfactory intermediate alternatives, and adjusts easily as new alternatives become available. Computational viability is defined precisely and the class of computationally viable choice functions is neatly characterized. In addition, the various types of binary choice functions are distinguished in terms of computational criteria.]
[For problems involving choices over "certain x uncertain" consumption pairs, it is almost universally assumed that the decision maker's preferences can be represented by an expected TPC (two-period cardinal) utility function. In this paper, we present an alternative representation of preferences, referred to as the "ordinal certainty equivalent" hypothesis, which we argue (i) is at least as intuitive as the expected utility hypothesis, (ii) includes the corresponding TPC representation as a special case with the set of cases not expressible in the latter format being both large and important, and (iii) is based on a more sensible hypothesis concerning the connection between "risk" and "time" preferences.]
An over-identified model could be defined as an exactly identified model that is subject to over-identifying restrictions. One could therefore define a constrained indirect least squares estimator for systems of equations similar to generalized least squares estimators under constraints for single equations. The estimator differs from three stage least squares in using the indirect least squares estimated covariance instead of the two stage least squares estimated covariance. With linear constraints, the estimator is linear. Under the overall null hypothesis with all constraints obtaining, the constrained indirect least squares estimator has the same asymptotic properties as the full infornhtation maximum likelihood estimator. The main advantage of the estimator lies in its easy adaptability to the multiple comparisonist's preferred testing procedure given the exactly identified model as maintained hypothesis. In this paper we stay with the likelihood principle and the corresponding preliminary Wald-type multiple X tests. 1. PROPERTIES OF SEQUENTIALLY CONSTRAINED MAXIMUM LIKELIHOOD ESTIMATORS BELOW WE DEFINE a family of estimators obtained by adding one or a group of constraints after another. To verify the properties of these estimators, we first compare the covariances in the asymptotic distribution of maximum likelihood estimators of models that differ in the number of prior constraints on the structural parameter. References are [1, 13, and 14], but we state the comparisons in a form that shows more of the details. Let f( ; xt, 0) be the density of the endogenous variables yt E R G conditional on the exogenous variables x, E R K and the reduced form parameter 0 E R m. For a sequence (yt), t = 1, . n of n independently selected endogenous variables,
Wage and price controls in the form of inflation ceilings are introduced into a dynamic extension of a variant of the IS-LM model. The controls do not alter the location of the equilibrium; rather, they affect the path and speed of adjustment of the economy. When slack exists, controls can be useful for lowering the rate of inflation and increasing employment and aggregate demand. However, when excess demand is present, controls although reducing the excess demand pressures and lowering the inflation rate may necessitate some form of commodity rationing. AN ISSUE THAT has recently received a great deal of attention is the effectiveness of wage and price controls as a macroeconomic policy tool. This paper studies the question in order to determine whether the view that controls are useful has a theoretical basis. Controls as introduced here are considered a means by which the government can affect the path of adjustment of the economy towards the equilibrium, and not an instrument by which the government can alter the location of the equilibrium itself. It is argued that if the economy faces cost-push type of inflation, where the actual inflation rate is above the equilibrium inflation rate, and the economy is adjusting to the equilibrium at a pace considered too slow, the institution of controls can result not only in a fairly rapid reduction in the rate of inflation but also some increase in employment. On the other hand, if the economy faces demand-pull inflation controls can prevent the economy from moving to an undesirable equilibrium and in the process reduce excess demand pressures although not eliminate them. As indicated above, for a macro model to be suitable for studying this problem, it is necessary both that it allow for inflation and that it be dynamic, in the sense of yielding information about not only equilibrium values but also the adjustment path of the economy. The formulation utilized adds to a variant of the IS-LM model a Phillips curve, a government balance equation, and an equation to indicate how inflationary expectations adjust. These additions make the IS-LM model dynamic and also incorporate wage and price inflation into that framework. This paper follows the tradition of Lipsey [1] in assuming that the Phillips curve is a labor market equation that relates the actual rate of wage inflation to the employment rate (or unemployment rate) and the expected rate of inflation. The government balance equation insures that government outflows equal government inflows. For example, when government expenditures exceed tax collections, the government must increase the size of its outstanding nominal debt to make up the difference. Finally, it is assumed that the expected rate of price inflation adapts towards the actual rate.
[For the two sample linear heteroscedastic regression model, moments of a popular two stage Aitken estimator are derived analytically. Even for small samples and/or near homoscedastic errors, the two stage procedure is surprisingly efficient relative to both unweighted least squares and the Gauss-Markov estimator. These exact results are compared with the author's previous calculations derived from Nagar approximations.]
[This paper deals with the problem of computing optimal strategies in a model of intertemporal choice under uncertainty for a competitive firm. The paper presents a method for computing the optimal strategies for (i) investment, (ii) production, (iii) financing, and (iv) consumption or dividends when (i) the entrepreneur's utility function displays constant absolute risk aversion, (ii) the production technology is certain and of the activity analysis variety, and (iii) prices are uncertain and serially independent. It is shown that the task of finding the optimal investment and production strategies reduces to a concave programming problem while the optimal financing and consumption strategies can be computed by analytical methods after the investment and production strategies are obtained. When prices are normally distributed, the optimal production and investment strategies can be found by means of quadratic programming.]
[Using cross-sectional agricultural household accounting record data for 1967 and 1968, a linear logarithmic expenditure system, consisting of three commodities--leisure, agricultural commodities, and nonagricultural commodities--is estimated for the Province of Taiwan. The hypothesis of utility maximization, as well as other hypotheses on functional form, are tested. It is found that the empirical evidence is consistent with utility maximization and that household labor supply depends on both the composition and the size of the household as well as the wage rate and prices. The consumption demand, labor supply, and marketed surplus elasticities with espect to prices, income, household composition, and household endowment variables are also reported.]
[The meaning of exchange efficiency is examined in the context of an economy in which agents differ in their endowments of information. Definitions of efficiency, and of the core, are proposed which emphasize the role of communication. Opportunities for insurance are preserved by restricting communication, or in a market system by restricting insider trading, prior to the pooling of information for the purposes of production.]