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with a substantial influence possibly attributed to the compatability

of the restricted reduced form with the process generating the additional

data. Remember that the structural parameters are not derived from

minimizing the reduced form errors. The directly updated reduced form

model, however, will be conditioned more by reduced form errors since

the strength of the structural restrictions will deteriorate as additional

measurement updates are made.


 The Recursive Structural Model


 Simultaneous equation models may offer advantages to least squares

estimation of an unrestricted reduced form if the structural model

provides useful restrictions that lead to more precise parameter

estimates over the forecast interval. A problem typically hampering

the use of many simultaneous equation models as forecasting tools is

the requirement that many so-called predetermined variables must be

forecast over the prediction period as well (Johnson). While methods

are availbalbe for evaluating forecast variances for such models

(Feldstein) they appear to weaken the structural approach particularly

when the predetermined variables must be forecast for example using

time series methods (Granger and Newbold).

 In view of this, the recursive model specified uses predetermined

 variables which are either deterministic or lagged two or more quarters.

 The model relates quarterly Choice steer prices to current levels of

 fed and non-fed cattle slaughter and pork production. A trend variable

 is included to account for all other factors, particularly growth

 in consumer income given that fed beef is generally assumed to be a