Dynamic adjustment cost models with forward-looking behaviour
AbstractIn this paper we propose a new approach for dynamic decision problems where forward-looking agents choose a set of non-stationary variables subject to quadratic adjustment costs. It is assumed that expectations are computed by a cointegrated Vector Equilibrium Correction Model (VEqCM). The role of feedbacks from the decision to the explanatory variables on solution properties and modelling approach is discussed. We show that once the system of interrelated Euler equations stemming from the agent's optimization problem is embedded within the VEqCM, a switching algorithm based on Generalized Least Squares can be used to estimate and test the model. A labour demand model for two Danish manufacturing industries is investigated empirically. Copyright Royal Economic Society 2006
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Royal Economic Society in its journal The Econometrics Journal.
Volume (Year): 9 (2006)
Issue (Month): 1 (03)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Fanelli, Luca, 2007.
"Present Value Relations, Granger Noncausality, And Var Stability,"
Cambridge University Press, vol. 23(06), pages 1254-1260, December.
- Fanelli, Luca, 2006. "Present value relations, Granger non-causality and VAR stability," MPRA Paper 1642, University Library of Munich, Germany.
- David Aristei & Luca Pieroni, 2007.
"Habits, Complementarities and Heterogenenity in Alcohol and Tobacco Demand: A Multivariate Dynamic Model,"
38, University of Verona, Department of Economics.
- David Aristei & Luca Pieroni, 2010. "Habits, Complementarities and Heterogeneity in Alcohol and Tobacco Demand: A Multivariate Dynamic Model," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(4), pages 428-457, 08.
- Giuseppe Cavaliere & Luca Fanelli & Attilio Gardini, 2006.
"International dynamic risk sharing,"
Quaderni di Dipartimento
1, Department of Statistics, University of Bologna.
- Giuseppe Cavaliere & Luca Fanelli & Attilio Gardini, 2009.
"Consumption risk sharing and adjustment costs,"
AccessEcon, vol. 29(2), pages 1117-1126.
- Fanelli, Luca, 2005.
"Testing the New Keynesian Phillips curve through Vector Autoregressive models: Results from the Euro area,"
1617, University Library of Munich, Germany, revised Jan 2007.
- Luca Fanelli, 2008. "Testing the New Keynesian Phillips Curve Through Vector Autoregressive Models: Results from the Euro Area," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(1), pages 53-66, 02.
- Luca Fanelli, 2006. "Testing the New Keynesian Phillips Curve through Vector Autoregressive models : Results from the Euro area," Quaderni di Dipartimento 0, Department of Statistics, University of Bologna.
- Fanelli, Luca, 2008.
"Evaluating the New Keynesian Phillips Curve under VAR-Based Learning,"
Economics Discussion Papers
2008-15, Kiel Institute for the World Economy.
- Fanelli, Luca, 2007. "Evaluating the New Keynesian Phillips Curve under VAR-based learning," MPRA Paper 1616, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.