By D. W. Challen
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Additional info for Macroeconometric Systems: Construction, Validation and Applications
16). 17) is, of course, the restricted reduced form. 17). The coefficients would be different, however, since they would be estimated directly instead of being derived via the estimates of the parameters of the structural form. 17) together with a set of values for the structural-form residuals and hence for the reduced-form residuals. If all structural-form residuals are allotted the value zero for purposes of the solution, the same will be true of the reduced-form residuals since, as already pointed out, the latter are merely linear combinations of the former.
1977) ORANI: A General Equilibrium Model of the Australian Economy, Australian Government Publishing Service, Canberra. , SuTTON, J. P. (1982), ORANI: A Multisectoral Model of the Australian Economy, North-Holland, Amsterdam. R. D. (1974) 'The Wharton Model Mark III: A Modern JS-LM Construct', International Economic Review, vol. 15, pp. 572-94. W. and SINAI, A. (1974) 'The Data Resources Model: Uses, Structure and Analysis of the US Economy', International Economic Review, vol. 15, pp. 595-615.
The simple linear tax function of the earlier system has been replaced, however, by a pair of relationships. 21), is definitional in that net tax collections is given as the product of the average tax rate (denoted by R,- the only new variable introduced) and real gross domestic product. Since it involves a product of endogenous variables, this equation is non-linear in the variables which means that SYSTEM II is a non-linear system. 22) explains the average tax rate R, as a linear function of real gross domestic product.