Reduced Form
In statistics, and particularly in econometrics, the reduced form of a system of equations is the result of solving the system for the endogenous variables. This gives the latter as a function of the exogenous variables, if any. In econometrics, "structural form" models begin from deductive theories of the economy, while "reduced form" models begin by identifying particular relationships between variables.
Let Y and X be random vectors. Y is the vector of the variables to be explained (endogeneous variables) by a statistical model and X is the vector of explanatory (exogeneous) variables. In addition let be a vector of error terms. Then the general expression of a structural form is, where f is a function, possibly from vectors to vectors in the case of a multiple-equation model. The reduced form of this model is given by, with g a function.
Read more about Reduced Form: Structural Form, Reduced Form, Structural and Reduced Forms With An Exogenous Variable, The General Linear Case, Transformation
Famous quotes containing the words reduced and/or form:
“The newspapers are the ruling power. Any other government is reduced to a few marines at Fort Independence. If a man neglects to read the Daily Times, government will go down on its knees to him, for this is the only treason these days.”
—Henry David Thoreau (1817–1862)
“The old idea that the joke was not good enough for the company has been superseded by the new aristocratic idea that the company was not worthy of the joke. They have introduced an almost insane individualism into that one form of intercourse which is specially and uproariously communal. They have made even levities into secrets. They have made laughter lonelier than tears.”
—Gilbert Keith Chesterton (1874–1936)