GLOSSARY ENTRY (DERIVED FROM QUESTION BELOW) | ||||||
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13:10 May 24, 2004 |
German to English translations [PRO] Bus/Financial - Mathematics & Statistics | |||||||
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| Selected response from: Steffen Walter Germany Local time: 14:26 | ||||||
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Summary of answers provided | ||||
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4 +1 | a simultaneous stochastic model in two equations |
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4 | two-equation model |
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two-equation model Explanation: The literal translation should work here - see e.g. http://ideas.repec.org/a/ecj/econjl/v97y1987i385p157-76.html http://www11.sdc.gc.ca/en/cs/sp/arb/publications/research/20... http://www.centralbank.ie/data/TechPaperFiles/1RT02.pdf Basically they say that they restrict their consideration to an estimate determined by a two-equation model, rather than taking all three existing correlations into account. NB spelling: "emp*i*rische Schätzung". |
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a simultaneous stochastic model in two equations Explanation: An simple example of a two equation empirical model in three variables would be the following: 1) y = a1 + b1•X + e1 2) X = a2 + b2•Z + e2 Although one may substitute for X in the first equation there would be an important loss of information, hence the necessity of a two equation model. Watch Y = a1 + b1(a2 + b2•Z +e2) + e1 Y = (a1 + b1•a2) + b1b2•Z + (b1•e2 + e1) which reduces to 3) Y = c1 + c2•Z + e3 where c1 = a1 + b1•a2 c2 = b1•b2 e3 = b1•e2 +e1 Although c1, c2, and c3 can be estimated, and you can ignore the equation e3= b1•e2 + e1, because the expected value of each term is equal to zero, you must still solve for a1, a2, b1, and b2. Substituing for b1 in the equation c1 = a1 + b1•a2 with c2/b2 leaves you with c1 = a1 + (c2/b2)•a2, which is a single equation in three unknowns! It is impossible to solve. Thus, I agree with the author. Nevertheless, I am disturbed by his use/her of the word "simultan" in this context, as the two-equation empirical model that I described at the outset is called a simultaneous stochastic model in two equations. I suggest you consult with the author. |
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