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Modelling the trend and seasonals within an AIDS model of the demand for alcoholic beverages in the United Kingdom

Author

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  • I. A. Moosa

    (La Trobe University, Victoria, Australia)

  • J. L. Baxter

    (University of Sheffield, Sheffield S1 4DT, UK)

Abstract

The argument that is put forward in this paper is that failure to represent stochastic trend and stochastic seasonality in an AIDS model leads to a misspecified and possibly structurally unstable model. This proposition is verified by estimating an AIDS model of the demand for alcoholic beverages in the United Kingdom. Three versions of the model are estimated, and it is demonstrated that the version allowing for stochastic trend and stochastic seasonality performs better than the other two versions of the model in terms of the diagnostics tests and goodness of fit measures. The best estimated model turns out to possess the properties of having common components and being homogenous. Further empirical testing reveals the presence of stochastic trends and cointegration between the budget shares of beer and wine. The results clearly indicate that there has been a shift away from the consumption of beer towards wine. Copyright © 2002 John Wiley & Sons, Ltd.

Suggested Citation

  • I. A. Moosa & J. L. Baxter, 2002. "Modelling the trend and seasonals within an AIDS model of the demand for alcoholic beverages in the United Kingdom," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(2), pages 95-106.
    • Handle: RePEc:jae:japmet:v:17:y:2002:i:2:p:95-106
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    References listed on IDEAS

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    1. Nyblom, Jukka & Harvey, Andrew, 2000. "Tests Of Common Stochastic Trends," Econometric Theory, Cambridge University Press, vol. 16(2), pages 176-199, April.
    2. Liam Lenten & Imad Moosa, 1999. "Modelling the trend and seasonality in the consumption of alcoholic beverages in the United Kingdom," Applied Economics, Taylor & Francis Journals, vol. 31(7), pages 795-804.
    3. Radfar, Mehran, 1985. "The effect of advertising on total consumption of cigarettes in the U.K. : A comment," European Economic Review, Elsevier, vol. 29(2), pages 225-231.
    4. Jones, Andrew M, 1989. "A Systems Approach to the Demand for Alcohol and Tobacco," Bulletin of Economic Research, Wiley Blackwell, vol. 41(2), pages 85-105, April.
    5. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
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    Cited by:

    1. Mazzocchi, Mario, 2006. "Time patterns in UK demand for alcohol and tobacco: an application of the EM algorithm," Computational Statistics & Data Analysis, Elsevier, vol. 50(9), pages 2191-2205, May.
    2. Peguero, Felipe & Kennedy, P. Lynn & Zapata, Hector O., 2018. "A Generalized Dynamic Inverse AIDS Model for Fresh Fruits and Vegetables: An Application to the U.S. Bell Pepper Industry," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266686, Southern Agricultural Economics Association.
    3. Muhammad, Andrew & Leister, Amanda M. & McPhail, Lihong & Chen, Wei, 2014. "The evolution of foreign wine demand in China," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 58(3), July.
    4. David C. Broadstock & Xun Chen, 2013. "A possible role for discriminatory fuel duty in reducing the emissions from road transport: some UK evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 20(6), pages 540-544, April.
    5. Mona Chitnis & Lester Hunt, 2011. "Modelling UK household expenditure: economic versus noneconomic drivers," Applied Economics Letters, Taylor & Francis Journals, vol. 18(8), pages 753-767.
    6. Timothy R. Davis & Fredoun Z. Ahmadi-Esfahani & Susana Iranzo, 2008. "Demand under product differentiation: an empirical analysis of the US wine market ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(4), pages 401-417, December.
    7. Davis, Timothy R. & Ahmadi-Esfahani, Fredoun Z. & Iranzo, Susana, 2008. "Demand under product differentiation: an empirical analysis of the US wine market," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(4), pages 1-17, December.
    8. Arvid Raknerud & Terje Skjerpen & Anders Swensen, 2007. "A linear demand system within a seemingly unrelated time series equations framework," Empirical Economics, Springer, vol. 32(1), pages 105-124, April.
    9. Satoshi Kabe & Yuichiro Kanazawa, 2014. "Estimating the Markov-switching almost ideal demand systems: a Bayesian approach," Empirical Economics, Springer, vol. 47(4), pages 1193-1220, December.
    10. Toshinobu Matsuda, 2007. "Linearizing the inverse quadratic almost ideal demand system," Applied Economics, Taylor & Francis Journals, vol. 39(3), pages 381-396.
    11. James Fogarty, 2010. "The Demand For Beer, Wine And Spirits: A Survey Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 24(3), pages 428-478, July.
    12. Sanvi Avouyi-Dovi & Christian Pfister & Franck Sédillot, 2019. "French Households’ Portfolio: The Financial Almost Ideal Demand System Appraisal," Working papers 728, Banque de France.

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