Structural Equations and Invariance

Giovanni Forchini

No 312, School of Economics Discussion Papers from School of Economics, University of Surrey

Abstract: The paper approaches structural econometric models using an algebraic approach. It shows that the invariance properties of the reduced form and the decision to exclude some of the exogenous variables from the structural equations fundamentally affect the functional form of the structural equation itself. A local approach based on Lie group theory shows that the functional form of the structural equation can be partially recovered from the invariance properties of the reduced form equations.

Pages: 27 pages
Date: 2012-02
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Persistent link: https://EconPapers.repec.org/RePEc:sur:surrec:0312

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