## An example: modelling the household sector

The complete Haavelmo distribution function—for example, the joint distribution (2.1) of all variables of the macro model—is not tractable and hence not an operational starting point for empirical econometric analysis. In practice, we have to split the system into subsystems of variables and to analyse each of them separately. Joint modelling is considered only within subsystems. But by so doing, one risks ignoring possible influences across the subsystems. This would translate into invalid conditioning (the weak exogeneity assumption is not satisfied) and invalid marginalisation (by omitting relevant explanatory variables from the analysis), which are known to imply inefficient statistical estimation and inference...

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