Building a structural model: Parameterization and structurality

A specific concept of structural model is used as a background for discussing the structurality of its parameterization. Conditions for a structural model to be also causal are examined. Difficulties and pitfalls arising from the parameterization are analyzed. In particular, pitfalls when considerin...

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Bibliographic Details
Published in:Econometrics 2016-06, Vol.4 (2), p.1-16
Main Authors: Mouchart, Michel, Orsi, Renzo
Format: Article
Language:English
Subjects:
causality
Decomposition
Econometrics
Economic models
Economic policy
Economic theory
exogeneity
misleading constraints
model identification
observationally equivalent models
Random variables
recursive decomposition
structural invariance
structural model
structurality
Studies
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Summary:A specific concept of structural model is used as a background for discussing the structurality of its parameterization. Conditions for a structural model to be also causal are examined. Difficulties and pitfalls arising from the parameterization are analyzed. In particular, pitfalls when considering alternative parameterizations of a same model are shown to have lead to ungrounded conclusions in the literature. Discussions of observationally equivalent models related to different economic mechanisms are used to make clear the connection between an economically meaningful parameterization and an economically meaningful decomposition of a complex model. The design of economic policy is used for drawing some practical implications of the proposed analysis.
ISSN:2225-1146
2225-1146
DOI:10.3390/econometrics4020023