Variables in a System of Equations
Before explaining how to use the SYSLIN procedure,
it is useful to define some terms.
The variables in a system of equations can be classified as follows:

Endogenous variables,
which are also called jointly dependent or response variables,
are the variables determined by the system.
Endogenous variables can also appear on the righthand side of equations.

Exogenous variables
are independent variables that do not
depend on any of the endogenous variables in the system.

Predetermined variables
include both the exogenous variables
and lagged endogenous variables, which are past values of endogenous
variables determined at previous time periods.
PROC SYSLIN does not compute lagged values;
any lagged endogenous variables must be computed in a preceding DATA step.

Instrumental variables
are predetermined variables used in obtaining predicted values
for the current period endogenous variables
by a firststage regression.
The use of instrumental variables characterizes estimation methods
such as twostage least squares and threestage least squares.
Instrumental variables estimation methods substitute
these firststage predicted values for endogenous variables when
they appear as regressors in model equations.
Copyright © 1999 by SAS Institute Inc., Cary, NC, USA. All rights reserved.