Advanced Search
MyIDEAS: Login to save this paper or follow this series

Testing for long-run homogeneity in the Linear Almost Ideal Demand System An application on Norwegian quarterly data for non-durables

Contents:

Author Info

  • Terje Skjerpen
  • Anders Rygh Swensen

    ()
    (Statistics Norway)

Abstract

We consider testing for long-run homogeneity within a dynamic consumer demand system allowing for non-stationarities. The static long-run solution is assumed to follow the Linear Almost Ideal Demand System and we test for long-run homogeneity within this system utilizing a triangular representation. Both long-run homogeneity in single equations and in the entire consumer system are considered. Consistent with the general triangular representation the deduced share equations depend on both current, lagged and leaded differenced explanatory variables (besides level variables and deterministic variables capturing trend and seasonality). Before testing for long-run homogeneity we test whether prices and real total expenditure are Granger-caused by the share variables. In the case with Granger-causality the leaded differenced variables can be omitted from the equation to be estimated. Thus Granger non-causality can be tested by looking at the joint significance of all leaded variables in all share equations simultaneously. The methodological framework is applied on non-durable consumption data from 1966:1 to 1997:4 taken from the unadjusted Norwegian National Accounts. We find that the null of no Granger-causality are clearly rejected and in light of this the differenced variables are retained when testing for long-run homogeneity. When testing for long-run homogeneity we consider different specifications of the deterministic trend and of the lags/leads specification. We find that the homogeneity-tests are substantially influenced by the specification of the deterministic trend. In one of the specifications long-run homogeneity is neither rejected for the single equations nor for the entire system. By imposing long-run homogeneity long-run Engel- and price elasticties can be calculated. Generally, the long-run elasticities seem reasonable.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ssb.no/a/publikasjoner/pdf/DP/dp289.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 289.

as in new window
Length:
Date of creation: Nov 2000
Date of revision:
Handle: RePEc:ssb:dispap:289

Contact details of provider:
Postal: P.O.Box 8131 Dep, N-0033 Oslo, Norway
Phone: (+47) 21 09 00 00
Fax: (+47) 21 09 49 73
Email:
Web page: http://www.ssb.no/en/
More information through EDIRC

Related research

Keywords: Consumer demand; LAIDS; Homogeneity; Non-Stationarity.;

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Pål Boug & Ådne Cappelen & Torbjørn Eika, 2013. "The importance of the distribution sector for exchange rate pass-through in a small open economy. A large scale macroeconometric modelling approach," Discussion Papers 731, Research Department of Statistics Norway.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ssb:dispap:289. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (J Bruusgaard).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.