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An Alternative Approach to the Specification of Structural Transition Functions


  • Charles M. Beach


This paper forwards an alternative approach of characterizing the adjustment trajectory by a cumulative probability distribution function. Estimates of Wilton's (1975) automobile import equation over the period 1984-1973 are obtained in the case where a binomial CDF is used. Confirming Wilton's results, the use of transition functions to characterize coefficient adjustment between two regimes leads to substantial improvements over standard OLS estimation. Also the CDF transition estimates compare very favourably with the polynomial results, at the same time yielding more reliable coefficient transition paths and an improved framework for more precise hypothesis testing of structural change.
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  • Charles M. Beach, 1977. "An Alternative Approach to the Specification of Structural Transition Functions," Canadian Journal of Economics, Canadian Economics Association, vol. 10(1), pages 132-141, February.
  • Handle: RePEc:cje:issued:v:10:y:1977:i:1:p:132-41

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    References listed on IDEAS

    1. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    2. Jonathan Eaton & Mark Gersovitz, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Oxford University Press, vol. 48(2), pages 289-309.
    3. Frenkel, Jacob A & Razin, Assaf, 1986. "Fiscal Policies in the World Economy," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 564-594, June.
    4. R. Dornbusch, 1984. "External Debt, Budget Deficits and Disequilibrium Exchange Rates," Working papers 347, Massachusetts Institute of Technology (MIT), Department of Economics.
    5. Ronald W. Jones & Douglas D. Purvis, 1981. "International Differences in Response to Common External Shocks: The Role of Purchasing Power Parity," Working Papers 419, Queen's University, Department of Economics.
    6. Alvin E Roth, 2008. "Axiomatic Models of Bargaining," Levine's Working Paper Archive 122247000000002376, David K. Levine.
    7. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
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