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Intercountry Evidence on the Performance of the Simple Error Correction Mechanism Model of Consumption

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  • Baltagi, Badi H
  • Mokhtari, Manouchehr

Abstract

This paper estimates a simple error correction mechanism (SECM) model of consumption a la Davidson, Hendry, Srba and Yeo (1978) for 13 OECD countries over the period 1951-82. This is done for each country separately as well as for the pooled data. The basic results of this study are the following: (1) The SECM model appears as an adequate approximation to the data generating process on an individual country basis as well as in a pooled context. (2) The pooled within estimator indicates a large and significant disequilibrium term while the between estimator indicates a small and insignificant disequilibrium term. This is consistent with the belief that the within estimator tend to yield short-run estimates while the between estimator tend to yield long-run estimates.

Suggested Citation

  • Baltagi, Badi H & Mokhtari, Manouchehr, 1990. "Intercountry Evidence on the Performance of the Simple Error Correction Mechanism Model of Consumption," Empirical Economics, Springer, vol. 15(4), pages 303-314.
    • Handle: RePEc:spr:empeco:v:15:y:1990:i:4:p:303-14
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