ü The Nature of Simultaneous-Equation Models
1. In contrast, to single-equation models, in simultaneous-equation models more than one dependent, or endogenous, variable is involved, necessitating as many equations as the number of endogenous variables.
2. A unique feature of simultaneous-equation models is that the endogenous variable in one equation may appear as an explanatory variable in another equation of the system.
3. As a consequence, such an endogenous explanatory variable becomes stochastic and is usually correlated with the disturbance term of the equation in which it appears as an explanatory variable.
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