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The SIMLIN Procedure |
The dynamic multiplier options require the system to have no lags of order greater than one. This limitation can be circumvented, since any system with lags greater than one can be rewritten as a system where no lag is greater than one by forming new endogenous variables that are single-period lags.
For example, suppose you have the third-order single equation
This can be converted to a first-order three-equation system by introducing two additional endogenous variables, y_{1,t} and y_{2,t}, and computing corresponding first-order lagged variables for each endogenous variable: y_{t-1}, y_{1,t-1}, and y_{2,t-1}. The higher order lag relations are then produced by adding identities to link the endogenous and identical lagged endogenous variables:
This conversion using the SYSLIN and SIMLIN procedures requires three steps:
See Example 16.2 for an illustration of how to convert an equation system with higher-order lags into a larger system with only first-order lags.
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