Assessing the Impact of Government Policy on Widget Consumption and Widget Sector Capital Usage

{ Posted on Nov 16 2009 by Menzie Chinn }

Let supply and demand for widgets (y) be given by the following two equations, respectively:

(1) yt = αt + β x t + ε t

(2) yt = γ + δ x t + Γ z t + u t

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