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On the interpretation of policy effects from estimates of simultaneous systems of equations

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  • George Ford
  • John Jackson

Abstract

The purpose of this paper is threefold: first, we warn analysts against the use of structural coefficient estimates alone for deducing quantitative inferences concerning many policy experiments. Second, we offer a potential solution to the problem by proposing a mutatis mutandis approach to deducing the 'full effect' of a policy change on the endogenous variables of the model. Finally, we show that this approach yields consistent estimates of the reduced form parameters, the true solution to the difficulty. An illustration is provided.

Suggested Citation

  • George Ford & John Jackson, 1998. "On the interpretation of policy effects from estimates of simultaneous systems of equations," Applied Economics, Taylor & Francis Journals, vol. 30(8), pages 995-999.
    • Handle: RePEc:taf:applec:v:30:y:1998:i:8:p:995-999
    DOI: 10.1080/000368498325165
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    Cited by:

    1. Mónica López-Puertas Lamy, 2012. "How does Ownership Structure Influence Bank Risk? Analyzing the Role of Managerial Incentives," Working Papers 1208, Departament Empresa, Universitat Autònoma de Barcelona, revised Nov 2012.
    2. Marsha Weber & Donna Dudney, 2003. "A Reduced Form Coefficients Analysis of Executive Ownership, Corporate Value, and Executive Compensation," The Financial Review, Eastern Finance Association, vol. 38(3), pages 399-413, August.
    3. Peter Calcagno & Monica Escaleras, 2007. "Party alternation, divided government, and fiscal performance within US States," Economics of Governance, Springer, vol. 8(2), pages 111-128, February.
    4. Tatum, Shaun W. & Skinner, Sarah J. & Jackson, John D., 2010. "On the economic sustainability of ethanol E85," Energy Economics, Elsevier, vol. 32(6), pages 1263-1267, November.

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