Example 204

REVISED FORM OF ST. LOUIS MODEL20

The well-known, and often controversial, St. Louis model originally developed in the late 1960s has been revised from time to time. One such revision is given in Table 20.8, and the empirical results based on this revised model are given in Table 20.9. (Note: Adot over a variable means the growth rate of that variable.) The model basically consists of Eqs. (1), (2), (4), and (5) in Table 20.8, the other equations representing the definitions. Equation (1) was

(Continued)

20Review, Federal Reserve Bank of St. Louis, May 1982, p. 14.

CHAPTER TWENTY: SIMULTANEOUS-EQUATION METHODS 783

EXAMPLE 20.4 (Continued) TABLE 20.8 THE ST. LOUIS MODEL

(1) Y = C1 + £ CM,(Mt-i) + £ CE(Et-i) + e1t i=0 i=0

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