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Forward- and Backward Looking Models for Norwegian Export Prices

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Abstract

The Norwegian export price for an aggregated commodity is modelled assuming price-setting behaviour. The focus is on the choice between backward- and forward looking models. The dynamics is modelled according to three different approaches; a backward looking error correction model and two forward looking models where rational expectations are assumed. The first forward looking model is derived from a multiperiod quadratic loss function imposing backward-forward restrictions on the parameters. The results from this specification are not encouraging. We then allow data to choose the lead structure, resulting in a less restrictive forward looking model. The backward- and forward looking models are compared to an estimated cointegrating vector for the long-run solution. An encompassing test on the backward- and forward looking model indicates that further research should look for a model that encompasses both of them.

Suggested Citation

  • Ingvild Svendsen, 1995. "Forward- and Backward Looking Models for Norwegian Export Prices," Discussion Papers 152, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:152
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    File URL: https://www.ssb.no/a/publikasjoner/pdf/DP/dp_152.pdf
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    Cited by:

    1. Ingvild Svendsen, 1998. "Rational Expectations in Price Setting. Tests Based on Norwegian Export Prices," Discussion Papers 226, Statistics Norway, Research Department.

    More about this item

    Keywords

    Export prices; Imperfect competition; Multiperiod loss function; Rational expectations; Error correction models;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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