Econometrica: Jul 1963, Volume 31, Issue 3

The Causal Interpretation of Non-Triangular Systems of Economic Relations

https://doi.org/0012-9682(196307)31:3<439:TCIONS>2.0.CO;2-9
p. 439-448

R. L. Basmann

In this paper is presented a simultaneous equation model that is non-triangular, its disturbances having a non-diagonal covariance matrix, and yet is causal and recursive, and whose underlying structural relations are also causal. The model is put forth as a counter-example to the Wold-Strotz claim that only triangular systems can be recursive and causal.

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