The SIMLIN Procedure

If an input data set is specified with the DATA= option in the PROC SIMLIN statement, the procedure reads the data and uses the reduced form equations to compute predicted and residual values for each of the endogenous variables. (If no data set is specified with the DATA= option, no simulation of the system is performed, and only the reduced form and multipliers are computed.)

The character of the prediction is based on the START= value. Until PROC SIMLIN encounters the START= observation, actual endogenous values are found and fed into the lagged endogenous terms. Once the START= observation is reached, dynamic simulation begins, where predicted values are fed into lagged endogenous terms until the end of the data set is reached.

The predicted and residual values generated here are different from those produced by the SYSLIN procedure since PROC SYSLIN uses the structural form with actual endogenous values. The predicted values computed by the SIMLIN procedure solve the simultaneous equation system. These reduced-form predicted values are functions only of the exogenous and lagged endogenous variables and do not depend on actual values of current period endogenous variables.