Interequation Constraint and the Specification of Dynamic Structure

This note considers the effect of a class of linear inter-equation constraints in the specification of the lag structure in econometric models. In particular, attention is focused on the linear summing, or "adding up"?, constraints which arise between equations in factor shares analysis. The consequences of such constraints on the specification of lag structures for models with dynamic adjustments and autoregressive or moving-average disturbances are presented in the form of linear restrictions which result in singular coefficient matrices . Thus, the structural (lag) specification of one equation depends on the structure of all other equations in the model.