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

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  • Holt, Matthew T.
  • Balagtas, Joseph V.

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

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References

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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.
  2. 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.
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  7. Davis, George C., 1997. "The Formal Logic Of Testing Structural Change In Meat Demand: A Methodological Analysis," Faculty Paper Series 23975, Texas A&M University, Department of Agricultural Economics.
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Cited by:
  1. Asche, Frank & Zhang, Dengjun, 2013. "Testing Structural Changes in the U.S. Whitefish Import Market: An Inverse Demand System Approach," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 42(3), December.
  2. Rodriguez, Nestor & Eales, James S., 2012. "Structural Change via Threshold Effects: Estimating U.S. Meat Demand Using Smooth Transition Functions," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington, Agricultural and Applied Economics Association 124366, Agricultural and Applied Economics Association.
  3. Hussein, Zekarias & Rodriguez, Nestor & Eales, James S., 2013. "STARs with the GIDDS: Smooth Transition Functions and Structural Change," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C., Agricultural and Applied Economics Association 150755, Agricultural and Applied Economics Association.
  4. Pede, Valerien O. & Valera, Harold Glenn A. & Alam, Mohammad Jahangir & McKenzie, Andrew M., 2013. "Nonlinearities in Regional Rice Prices in the Philippines: Evidence from a Smooth Transition Autoregressive (STAR) Approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C., Agricultural and Applied Economics Association 150246, Agricultural and Applied Economics Association.
  5. Sanders, Daniel J. & Balagtas, Joseph Valdes & Gruere, Guillaume P., 2011. "Revisiting the palm oil boom: An examination of consumption in the oils complex," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania, Agricultural and Applied Economics Association 103726, Agricultural and Applied Economics Association.
  6. Darko, Francis Addeah & Eales, James S., 2013. "Meat Demand in the US During and After the Great Recession," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C., Agricultural and Applied Economics Association 150146, Agricultural and Applied Economics Association.

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