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Bias and Sensitivity of Multipliers |
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| Authors: | Thijs ten Raa Pieter Kop Jansen |
| Institution: | 1. Tilburg University , PO Box 90153, Tilburg, LE, NL-5000, Netherlands Phone: 31 13466 2365 Fax: 31 13466 2365 E-mail: tenraa@kub.nl;2. Erasmus University Rotterdam , PO Box 1738, Rotterdam, DR, NL-3000, Netherlands Phone: 31 10 408 2719 Fax: 31 10 408 2719 E-mail: kopjansen@gbr.frg.eur.nl |
| Abstract: | Multipliers measure the derivatives of endogenous variables with respect to exogenous shocks and are functions of the structural parameters of an economic model. Substitution of the structural parameter estimates yields a so-called derived estimate for a multiplier or any reduced-form parameter. Derived estimates are biased. This paper presents first-order approximations to the biases and sensitivities of multipliers. The good performance of a flawed formula in input–output analysis is illuminated. |
| Keywords: | Multipliers bias input–output analysis |