Forward- and Backward Looking Models for Norwegian Export Prices
AbstractThe 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.
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Bibliographic InfoPaper provided by Research Department of Statistics Norway in its series Discussion Papers with number 152.
Date of creation: Aug 1995
Date of revision:
Export prices; Imperfect competition; Multiperiod loss function; Rational expectations; Error correction models;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
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- Ingvild Svendsen, 1998. "Rational Expectations in Price Setting. Tests Based on Norwegian Export Prices," Discussion Papers 226, Research Department of Statistics Norway.
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