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∗ Some of the ideas in this paper appeared in Reference 1(a), a later version of which was presented to the World Congress of the Econometric Society, Rome, 1965.1(b) Since these papers appeared, the mathematical exposition has been improved, the results made more general and some new results (on efficiency) added. Some of the results reported were developed in connection with the research project: ‘An econometric model of the U.K. and its trading partners’, which is financed in part by a grant from the Social Science Research Council to the University of Southampton.
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