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

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  • Philippe J. Deschamps

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

Abstract

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.

Suggested Citation

  • Philippe J. Deschamps, 2003. "Time-varying intercepts and equilibrium analysis: an extension of the dynamic almost ideal demand model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(2), pages 209-236.
  • Handle: RePEc:jae:japmet:v:18:y:2003:i:2:p:209-236
    DOI: 10.1002/jae.674
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    File URL: http://qed.econ.queensu.ca:80/jae/2003-v18.2/
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    References listed on IDEAS

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    1. Deschamps, Philippe J., 1998. "Full maximum likelihood estimation of dynamic demand models," Journal of Econometrics, Elsevier, vol. 82(2), pages 335-359, February.
    2. Anderson, G J & Blundell, R W, 1982. "Estimation and Hypothesis Testing in Dynamic Singular Equation Systems," Econometrica, Econometric Society, vol. 50(6), pages 1559-1571, November.
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    8. 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.
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    Cited by:

    1. Balcombe, Kelvin & Bailey, Alastair, 2006. "Bayesian inference of a smooth transition dynamic almost ideal model of food demand in the US," MPRA Paper 17305, University Library of Munich, Germany.
    2. Mazzocchi, Mario & Lobb, Alexandra E., 2005. "A Latent-Variable Approach to Modelling Multiple and Resurgent Meat Scares in Italy," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24509, European Association of Agricultural Economists.
    3. Deschamps, Philippe J., 2011. "Bayesian estimation of an extended local scale stochastic volatility model," Journal of Econometrics, Elsevier, vol. 162(2), pages 369-382, June.
    4. Blazej Mazur, 2006. "Imposing Economic Restrictions in a VECM-form Demand System," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 7, pages 269-280.
    5. SCHROYEN, Fred, 2011. "Attitudes towards income risk in the presence of quantity constraints," CORE Discussion Papers 2011020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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