T. Kinal, et K. Lahiri,, On the estimation of simultaneous-equations error-components models with an application to a model of developing country foreign trade, Journal of applied econometrics , 8(1), 1993, pp. 81-92
An empirical balance of payments model involving the demand and supply of imports and exports for 31 developing countries is estimated utilizing panel data over 1964-1987. In order to compute error-components 3SLS estimates of this model, which requires different instruments for different equations, we propose a generalization of the Fuller-Battese transformation to obtain GMM estimates. Our empirical results suggest that very little of the short-run adjustment in external imbalances is likely to be achieved by exchange rate policies, and most of the burden must fall on aggregate demand management.