In this presentation, identification problem is explained with the example of Supply and Demand equilibrium and why identification problem arises. In addition, the rank and order conditions are also introduced. For further explanation, checkout the youtube link: https://youtu.be/PyU_RJJspfE

1. Identification Problem in
Simultaneous Equations Model
-ECONOMETRICS
BY:- GARIMA GUPTA

2. • Identified
1. Exactly identified
2. Over identified
• Unidentified
1. Under identified

3. WHY IDENTIFICATION PROBLEM?
• It arises because different sets of structural
coefficients maybe compatible with the same
set of data.

4. Unidentified equations
α0 +α1Pt +u1t = β0 +β1Pt +u2t

5. Rules for Identification
1. Order condition
2. Rank condition
The order condition is a necessary but not
sufficient condition for identification; that is,
even if it is satisfied, it may happen that an
equation is not identified.

6. THANKS FOR WATCHING! 