Computing the Reduced Form

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The SIMLIN Procedure

Computing the Reduced Form

First, the SIMLIN procedure computes reduced form coefficients by premultiplying by G^-1:

y_t = G^-1C y^L_t+G^-1B x_t

This can be written as

$y_{t}={\Pi}_{1} y^L_{t}+{\Pi}_{2}x_{t}$

where ${\Pi}$ ₁= G^-1C and ${\Pi}$ ₂= G^-1B are the reduced form coefficient matrices.

The reduced form matrices ${\Pi}$ ₁= G^-1C and ${\Pi}$ ₂= G^-1B are printed unless the NORED option is specified in the PROC SIMLIN statement. The structural coefficient matrices G, C, and B are printed when the ESTPRINT option is specified.

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