By D. Royer, G. Ritschard (auth.), J. P. Ancot (eds.)
Understanding the constitution of a giant econometric version is just like the artwork of winetasting or just like the paintings of enjoying a musical software. the standard of a wine effects from a posh mix of assorted parts resembling its color which will be transparent and crystalline, its odor which are decomposed right into a common aroma and various specific features, roughly continual looking on the sort and the age of the wine, its style, after all, which back is a posh process whose equilibrium and beauty depend upon the total set of constituents: alcohol, tannin, glycerine, sugar, acidity . . . equally, a clarinetist's musicianship is determined by the standard of his tool, on his embouchure, fingering, tonguing and articu lation recommendations, on his feel for rhythm, phasing and tone color. notwithstanding, the attraction produced by way of a Romanee-Conti or by way of a super functionality of Brahm's F minor sonata for clarinet and piano arises from a strategy that's whilst time a lot easier and masses extra advanced than the easy juxtaposition of person causal family members. in recent times econometricians and macro-economists were challenged via the matter of protecting abreast with an ever expanding variety of more and more complicated huge econometric versions. the need of constructing systematic analytical instruments to check the usually implicit and hidden constitution of those versions has turn into extra evident.
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The weakness of the second step results and the phenomenon of causal circularity justify the introduction of the concept of loop (or feedback). That concept, for which we try to find an economic interpretation, is essential in this process and the determination of the feedbacks is the third step of the reading. Different approaches, like those of Keller (1970), Deleau and Malgrange (I 978), Gilli and Rossier (1981) and Brillet ( 1981 a) have distinguished between two meanings of the feedback set; the first one is such that its cardinality is minimised and the 36 second one is such that the quantitative impact (error) due to its deletion is minimised.
This technique greatly facilitates the understanding of an interdependent model. For the solving process, the interest of such schemes has also been put forward. 31 APPENDIX: Endogenous variables of the interdependent block AWHPE WORKWEEK, PVT EMPLOYEES* IND BUS TAXES $ BIT INVENTORY INVESTMENT BIV INVENTORY VAL ADJ $* BIVA BUSPY BUS & PROF INCOME $* CAP CON ALLOW, TOT $* CCA CAP CON ALLOW, CORP $* CCCA COMP OF EMPLOYEES $ CE CF CASH FLOW $ CONSUMPTION* CON CHPNF COMP/MHR, PVTNFM (I) CORP PROFITS AFTER TAX $ CPAT CORP PROFITS BEFORE TAX $ CPBT CSS CONT SOC INS $ CSSE EMPL YR CONT TO SOC INS $ FED GOV REC, SOC INS TAX $ CSSF CTAX CORP TAX LIABILITIES $ DC CON EXP, DUR'" DEP CHECKABLE DEPOSITS $'" DIV DIVIDENDS $'" DPI DISP PERS INCOME $ EM IMPORTS'" EMPLY EMPLOYMENT, CIVILIAN FHA FHA MORTGAGE RATE $'" FR FREE RESERVES $ FINAL SALES FS GEX GOV PURCHASE OF G & S GEXF FED GOV PUR, TOT S& L GOV PUR, TOT GEXS GIPF FED GOV INT PAYMENTS $* GNP GROSS NATIONAL PRODUCT GNPC GROSS NATIONAL PRODUCT $ GNPG GOVTGNP GNPGS S&LGOV GNP* GNPP GROSS PRIVAT PRODUCT GPDI GROSS PVT DOM INVESTMENT GTP GOV TRAN PAYMENTS $ KDC STOCK, CONS DUR KPD STOCK, PROD DUR, TOT KPDX STOCK, PROD OUR, POL CON KPS STOCK, PROD STR, TOT KPSX STOCK, PROD STR, POL CON LRAC LONG RUN AVERAGF COST LRMKUP LONG RUN MARKUP CON EXP, NONDUR * NDC NETEX NET EXPORTS NIP NET INTEREST PAYMENTS $ NW NET WORTH, TOT $ NWDBT NET WORTH, BONDS $ PlY PMHE PN PNDC PNE PPD PPFI PPS PQFW PRC PRODN PRPY PS PSBIV PSC PSFW PTC PVC PVDPD PVDPS PWPI QPDC QPQFW RC RCB RCK RDC RDISV RDP RE RFDC RFI RHM RHS PRD PROM RPS RR RSAV RSI RTB RYP SBIV SC SWS TC TIBVA UB UNEM PERS INT INCOME $ MANHOURS, PVT EMPLOYEES EMPLOYMENT, PVT* DEFL, CON EXP, NONDUR* EMPLOYMENT, PVT ESTAB* DEFL, DEFL, DEFL, DEFL, DEFL, PFI, PROD DUR EQ* PFI, TOT PFI, NONRESCONSTR* FW PVT GNP (NOT)* RES CONSTRUCTION* OUTPUT/MHR, NORM PVTFM (I) PROPRIETORS INCOME $ PFI, NONRES CONSTRUCTN'" DEFL, INVENTORY STOCK'" DEFL, CON EXP, SERVICES'" DEFL, FW SALES (NOT) DEFL, PERS CONS EXPEND DEFL, PVT ON IN PLACE* PV DEP ALL, PROD DUR $ PV DEP ALL, PROD STR $ PRODUCER PRICE INDEX* EXPECTED %CHG, PDC EXPECTED O/£HG, PQFW RESIDENTIAL CONSTRUCTN AAA CORP BOND RATE $ COST OF CAPITAL RENT, CON DUR DISCOUNT RATE (EFF) $* DIV/PRICE RATIO* UNDISTRIBUTED PROFITS $ RENTAL FLOW, CONS OUR FED GOV REC, IND BUS TAX $ RENT, MULT FAM HOUS RENT, SING FAM HOUS RENT.
We attempt to conclude by proving the relevance of the second point of view with regard to the actual reading of a model by a macro-economist. 2. FIRST READING STEP: BUILDING A CAUSAUTY RELAnON In 1960, Strotz and Wold have stressed the gap between descriptive models (well known as 'black boxes') and causal models as in macroeconomics. In the latter models functional relationships between variables are not only guessed but are given a causal meaning: thus the dissymmetry between explanatory variable and explained variable introduced by econometricians and the dissymmetry between cause and effect are the same, even if this causality may appear with a probabilistic dimension.