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Estimating Structural Change with Smooth Transition Regressions: an Application to Meat Demand

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Author Info
Holt, Matthew T.
Balagtas, Joseph V.

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Abstract

This paper explores the role of structural change in systems of demand equations. Specifically, we adapt the time—varying regression framework of Lin and Teräsvirta (1994), which in turn is related to the dynamic smooth transition models introduced by Teräsvirta (1994). Unlike previous efforts at modeling structural change in demand systems, we do not impose the nature of the change to be monotonic—several non-monotonic alternatives are considered. An application is presented using the Almost Ideal Inverse Demand System (IAIDS) applied to U.S. meat demand data, 1960-2004. Results show the importance of modeling structural change and that, moreover, the best-fitting model is associated with a form of symmetric, non-monotonic structural change.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15331.

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Date of creation: 20 May 2009
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Handle: RePEc:pra:mprapa:15331

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Related research
Keywords: Inverse Almost Ideal Demand System; Meat Demand; Structural Change; Time-Varying Regression;

Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing

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  1. Skalin, Joakim, 1998. "Testing linearity against smooth transition autoregression using a parametric bootstrap," Working Paper Series in Economics and Finance 276, Stockholm School of Economics, revised 13 Dec 1998. [Downloadable!]
  2. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-30, March. [Downloadable!] (restricted)
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  3. Seo, Myunghwan, 2006. "Bootstrap testing for the null of no cointegration in a threshold vector error correction model," Journal of Econometrics, Elsevier, vol. 134(1), pages 129-150, September. [Downloadable!] (restricted)
  4. Alston, Julian M. & Chalfant, James A., 1991. "Can We Take The Con Out Of Meat Demand Studies?," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(01), July. [Downloadable!]
  5. Holt, Matthew T., 2002. "Inverse demand systems and choice of functional form," European Economic Review, Elsevier, vol. 46(1), pages 117-142, January. [Downloadable!] (restricted)
  6. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November. [Downloadable!] (restricted)
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  7. Holt, Matthew T., 1998. "Autocorrelation specification in singular equation systems: A further look," Economics Letters, Elsevier, vol. 58(2), pages 135-141, February. [Downloadable!] (restricted)
  8. Eales, James S. & Unnevehr, Laurian J., 1994. "The inverse almost ideal demand system," European Economic Review, Elsevier, vol. 38(1), pages 101-115, January. [Downloadable!] (restricted)
  9. Barten, A. P. & Bettendorf, L. J., 1989. "Price formation of fish : An application of an inverse demand system," European Economic Review, Elsevier, vol. 33(8), pages 1509-1525, October. [Downloadable!] (restricted)
  10. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June. [Downloadable!] (restricted)
  11. Farley, John U. & Hinich, Melvin & McGuire, Timothy W., 1975. "Some comparisons of tests for a shift in the slopes of a multivariate linear time series model," Journal of Econometrics, Elsevier, vol. 3(3), pages 297-318, August. [Downloadable!] (restricted)
  12. Pollak, Robert A. & Wales, Terence J., 1991. "The likelihood dominance criterion : A new approach to model selection," Journal of Econometrics, Elsevier, vol. 47(2-3), pages 227-242, February. [Downloadable!] (restricted)
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  13. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July. [Downloadable!] (restricted)
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