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THIS ARTICLE DEVELOPS A SIMULTANEOUS EQUATION MODEL OF THE VOTING DECISION IN A FORM THOUGHT TO MIRROR THE MAIN LINES OF COGNITIVE DECISION-MAKING PROCESSES OF INDIVIDUAL VOTERS. THE UTILITY OF THE MODEL IS ASSESSED BY EXAMINING ITS GOODNESS OF FIT TO THE 1972-1976 PANEL DATA GATHERED BY THE CENTER FOR POLITICAL STUDIES, UNIVERSITY OF MICHIGAN.

In recent years the gap between real exchange rate (RER) and
nominal exchange rate (NER) has widened in Pakistan. A proper
understanding of the determinants of real exchange rate can be extremely
useful for the management of current account deficit. The results of
this study show that the Simultaneous Equation Model gives better
results than the Single Equation Model. The estimated coefficients
reveal that changes in both monetary and real sector variables affect
the equilibrium path of RER. The distinction between traded and
non-traded goods can also help in proper real exchange rate
management.

Current sociological theory often leads to underidentified simultaneous-equation models, some of which are "identified" by arbitrary specification. This paper applies the term sensitivity analysis to methods for exploring how numerical parameter estimates depend upon the identifying assumptions in such models. Three ad hoc sensitivity analysis methods are identified that have been used in the literature: (1) estimation under alternative specifications, (2) trying out a range of numerical values of underidentified parameters, and (3) the use of algebraic inequalities to obtain bounds on sample estimates of parameters. Mathematical programming is introduced here as a fourth method generalizing the last procedure and is then applied to a specific numerical example.

This article develops a simultaneous equation model of the voting decision in a form thought to mirror the main lines of cognitive decision-making processes of individual voters. The model goes beyond earlier efforts in two respects. First, it explicitly represents the causal interdependence of voter assessments in the election situation, permitting such estimations as the degree to which correlations between voter issue positions and issue positions ascribed to preferred candidates arise because of projection onto the candidate or persuasion by the candidate. Secondly, the model is truly dynamic, in the sense that it is dependent on longitudinal data for its proper estimation. The utility of the model is certified by the goodness of fit achieved when applied to 1972–76 panel data for a sample of the national electorate.