23 Nov Control Variables – Demand – Supply Model
In continuation of the discussion on selecting control variables. Another way to set control variables is to split the model into demand and supply model. This approach is coined as demand supply equilibrium modelling using simultaneous equation approach. Popular examples of such models include (Afzal, 2000; Goldstein & Khan, 1978).
The advantage of this approach is that you can further assess the shortage or surplus status of the dependent variable which is probably the economic good or a service.
Your participation and suggestions are welcomed.
Afzal, M. (2000). Import functions for Pakistan–a simultaneous equation approach. The Lahore Journal of Economics, 6(2), 109-116
Goldstein, M., & Khan, M. S. (1978). The supply and demand for exports: a simultaneous approach. The Review of Economics and Statistics, 275-286.