Equations within a model in which a number of dependent variables appear as explanatory variables in more than one equation. These dependent variables are simultaneously determined by other dependent variables and explanatory variables in the system. For example, increased demand for a product could lead to increased sales, which lead to economies of scale, which lead to lower costs, which lead to lower prices, which then lead to increased sales for the product. Research on simultaneous equations was popular in the 1950s. According to Christ (1960) however, this approach had not been useful in forecasting and this conclusion has not changed since then.
- Christ, C. F. (1960), “Simultaneous equation estimation:
Any verdict yet?”
*Econometrica*, 28, 835-845.