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Time-varying intercepts and equilibrium analysis: an extension of the dynamic almost ideal demand model

  • Philippe J. Deschamps

    (Séminaire d'Économétrie, Université de Fribourg, Avenue de Beauregard 13, CH-1700 Fribourg, Switzerland)

Demographic effects and user costs in demand systems have usually been modelled explicitly. A more robust approach is a state space formulation of the demand system, where time-varying intercepts account for the effects of unobservable variables. The author embeds such a system in a vector autoregressive distributed lag model, with a Bayesian hierarchical prior. The model is estimated by a Markov chain Monte Carlo method on samples involving quarterly US and UK data. In the US case, the results are compared with a previously published cointegration analysis of the same data. Copyright © 2002 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jae.674
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 18 (2003)
Issue (Month): 2 ()
Pages: 209-236

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Handle: RePEc:jae:japmet:v:18:y:2003:i:2:p:209-236
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  1. Mizon, Grayham E., 1995. "A simple message for autocorrelation correctors: Don't," Journal of Econometrics, Elsevier, vol. 69(1), pages 267-288, September.
  2. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
  3. Deschamps, Philippe J., 1998. "Full maximum likelihood estimation of dynamic demand models," Journal of Econometrics, Elsevier, vol. 82(2), pages 335-359, February.
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  11. Deschamps, Philippe J., 2000. "Exact small-sample inference in stationary, fully regular, dynamic demand models," Journal of Econometrics, Elsevier, vol. 97(1), pages 51-91, July.
  12. Pashardes, Panos, 1986. "Myopic and Forward Looking Behavior in a Dynamic Demand System," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(2), pages 387-97, June.
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  16. Anderson, Gordon & Blundell, Richard, 1983. "Testing Restrictions in a Flexible Dynamic Demand System: An Application to Consumers' Expenditure in Canada," Review of Economic Studies, Wiley Blackwell, vol. 50(3), pages 397-410, July.
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