IDEAS home Printed from https://ideas.repec.org/a/sbe/breart/v15y1995i2a2885.html
   My bibliography  Save this article

A Monte Carlo Study on the Fit of a Cost Function by a Fourier Flexible Functional Form

Author

Listed:
  • Souza, João Carlos F.
  • Souza, Geraldo S.

Abstract

We use the simulation model of Chalfallt and Gallant (1985) to investigate the fit of a Fourier flexible form to a cost function when interest is to estimate elasticities of substitution. The data is subject to errors in variables and the estimation method is seemingly unrelated regressions. We use two approximating Fourier functional forms with 13 (FFF13) and 22 (FFF22) parameters. The biases in point estimation are negligible for FFF13. The classical t statistics do not follow, in general, the Student's distribution. Even when estimates are properly centered and scaled there are cases where the normal approximation does not hold.

Suggested Citation

  • Souza, João Carlos F. & Souza, Geraldo S., 1995. "A Monte Carlo Study on the Fit of a Cost Function by a Fourier Flexible Functional Form," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 15(2), November.
    • Handle: RePEc:sbe:breart:v:15:y:1995:i:2:a:2885
    as

    Download full text from publisher

    File URL: https://periodicos.fgv.br/bre/article/view/2885
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gallant, A. Ronald & Souza, Geraldo, 1991. "On the asymptotic normality of Fourier flexible form estimates," Journal of Econometrics, Elsevier, vol. 50(3), pages 329-353, December.
    2. Andrews, Donald W K, 1994. "Asymptotics for Semiparametric Econometric Models via Stochastic Equicontinuity," Econometrica, Econometric Society, vol. 62(1), pages 43-72, January.
    3. Gallant, A. Ronald, 1981. "On the bias in flexible functional forms and an essentially unbiased form : The fourier flexible form," Journal of Econometrics, Elsevier, vol. 15(2), pages 211-245, February.
    4. Elbadawi, Ibrahim & Gallant, A Ronald & Souza, Geraldo, 1983. "An Elasticity Can Be Estimated Consistently without A Priori Knowledge of Functional Form," Econometrica, Econometric Society, vol. 51(6), pages 1731-1751, November.
    5. Chalfant, James A. & Gallant, A. Ronald, 1985. "Estimating substitution elasticities with the Fourier cost function : Some Monte Carlo results," Journal of Econometrics, Elsevier, vol. 28(2), pages 205-222, May.
    6. Gallant, A. Ronald, 1982. "Unbiased determination of production technologies," Journal of Econometrics, Elsevier, vol. 20(2), pages 285-323, November.
    7. Guilkey, David K & Lovell, C A Knox & Sickles, Robin C, 1983. "A Comparison of the Performance of Three Flexible Functional Forms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(3), pages 591-616, October.
    8. Berndt, Ernst R & Khaled, Mohammed S, 1979. "Parametric Productivity Measurement and Choice among Flexible Functional Forms," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1220-1245, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chalfant, James & Wallace, Nancy, 1991. "Testing the Translog Specification with the Fourier Cost Function," CUDARE Working Papers 198581, University of California, Berkeley, Department of Agricultural and Resource Economics.
    2. S. Carbo & E. P. M. Gardener & J. Williams, 2003. "A note on technical change in banking: the case of European savings banks," Applied Economics, Taylor & Francis Journals, vol. 35(6), pages 705-719.
    3. Tai‐Hsin Huang & Mei‐Hui Wang, 2003. "Estimation of Technical and Allocative Inefficiency Using Fourier Flexible Cost Frontiers for Taiwan's Banking Industry," Manchester School, University of Manchester, vol. 71(3), pages 341-362, June.
    4. Altunbas, Y. & Gardener, E. P. M. & Molyneux, P. & Moore, B., 2001. "Efficiency in European banking," European Economic Review, Elsevier, vol. 45(10), pages 1931-1955, December.
    5. Yingzhuo Yu & Cesar Escalante & Xiaohui Deng & Jack Houston & Lewell Gunter, 2011. "Analysing scale and scope specialization efficiencies of US agricultural and nonagricultural banks using the Fourier flexible functional form," Applied Financial Economics, Taylor & Francis Journals, vol. 21(15), pages 1103-1116.
    6. Douglas Fisher & Adrian R. Fleissig & Apostolos Serletis, 2006. "An Empirical Comparison of Flexible Demand System Functional Forms," World Scientific Book Chapters, in: Money And The Economy, chapter 13, pages 247-277, World Scientific Publishing Co. Pte. Ltd..
    7. Paul W. Wilson & Kathleen Carey, 2004. "Nonparametric analysis of returns to scale in the US hospital industry," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(4), pages 505-524.
    8. Kesavan, Thulasiram, 1988. "Monte Carlo experiments of market demand theory," ISU General Staff Papers 198801010800009854, Iowa State University, Department of Economics.
    9. Fleissig, Adrian R. & Kastens, Terry & Terrell, Dek, 1997. "Semi-nonparametric estimates of substitution elasticities," Economics Letters, Elsevier, vol. 54(3), pages 209-215, July.
    10. Shaikh, Sabina L., 1998. "A Whale Of A Good Time: Exploring Flexibility In The Recreation Demand Model," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20826, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    11. Wheelock, David C. & Wilson, Paul W., 2008. "Non-parametric, unconditional quantile estimation for efficiency analysis with an application to Federal Reserve check processing operations," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 209-225, July.
    12. David C. Wheelock & Paul W. Wilson, 2009. "Robust, dynamic nonparametric benchmarking: the evolution of cost-productivity and efficiency among U.S. credit unions," Working Papers 2009-008, Federal Reserve Bank of St. Louis.
    13. Mai, Nhat Chi, 2015. "Efficiency of the banking system in Vietnam under financial liberalization," OSF Preprints qsf6d, Center for Open Science.
    14. Fleissig, Adrian R. & Kastens, Terry & Terrell, Dek, 2000. "Evaluating the semi-nonparametric fourier, aim, and neural networks cost functions," Economics Letters, Elsevier, vol. 68(3), pages 235-244, September.
    15. Kim, Tae-Kyun, 1989. "The factor bias of technical change and technology adoption under uncertainty," ISU General Staff Papers 1989010108000010138, Iowa State University, Department of Economics.
    16. LaFrance, Jeffrey T & Pope, Rulon D., 2006. "Full Rank Rational Demand Systems," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt8qx7n6p9, Department of Agricultural & Resource Economics, UC Berkeley.
    17. David C. Wheelock & Paul W. Wilson, 2011. "Are Credit Unions Too Small?," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1343-1359, November.
    18. William A. Barnett & Ikuyasu Usui, 2007. "The Theoretical Regularity Properties of the Normalized Quadratic Consumer Demand Model," International Symposia in Economic Theory and Econometrics, in: Functional Structure Inference, pages 107-127, Emerald Group Publishing Limited.
    19. Adrian R. Fleissig, 2016. "Changing Trends in U.S. Alcohol Demand," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(3), pages 263-276, September.
    20. John K. Ashton & Khac Pham, 2007. "Efficiency and Price Effects of Horizontal Bank Mergers," Working Papers 07-9, Centre for Competition Policy, University of East Anglia.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sbe:breart:v:15:y:1995:i:2:a:2885. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Núcleo de Computação da FGV EPGE (email available below). General contact details of provider: https://edirc.repec.org/data/sbeeeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.