Abstract
Publisher Summary The parametric fix-point (PFP) method can be applied to systems without identities and in the presence of identities. The structural coefficients of an identity are known in advance and therefore, the first semi-step in the step from s to s + 1 in the iterative procedure is omitted for the identities. This chapter presents the fix-point method with pseudovariables. The PFP method deals with hithero has the drawback that the original programs for the fix-point method cannot be used as they stand. If the hitherto size T equals the number m of predetermined variables, the endogenous variables is expressed as linear combinations of the predetermined variables, provided that no exact linear combination persists between the predetermined variables themselves. When the sample size exceeds the number of predetermined variables, a number of pseudovariables are constructed, which gives rise to row vectors with q elements. The chapter also discusses an application to a model with two over identified behaviour relations and one identity.
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