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Estimation of a Continuous-Time Dynamic Demand System

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  • Chambers, Marcus J

Abstract

A continuous-time dynamic model of consumers' demand, explicitly taking account of the roles of depreciation, interest rates, habits, and stocks, is estimated using recently developed techniques from discrete quarterly U.K. data on three broad commodity groupings. The results suggest that, whilst being a significant determinant of demand, the actual magnitude of the influence of changes in interest rates may be relatively small in the long run. The cross-price effects of durable goods are also found to be statistically significant, and symmetry of long-run compensated price responses is not rejected. Copyright 1992 by John Wiley & Sons, Ltd.

Suggested Citation

  • Chambers, Marcus J, 1992. "Estimation of a Continuous-Time Dynamic Demand System," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(1), pages 53-64, Jan.-Marc.
  • Handle: RePEc:jae:japmet:v:7:y:1992:i:1:p:53-64
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    References listed on IDEAS

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    1. Lluch, Constantino, 1973. "The extended linear expenditure system," European Economic Review, Elsevier, vol. 4(1), pages 21-32, April.
    2. Phlips, Louis, 1972. "A Dynamic Version of the Linear Expenditure Model," The Review of Economics and Statistics, MIT Press, pages 450-458.
    3. Bergstrom, A.R., 1984. "Continuous time stochastic models and issues of aggregation over time," Handbook of Econometrics,in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 20, pages 1145-1212 Elsevier.
    4. 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.
    5. Bergstrom, A. R., 1986. "The Estimation of Open Higher-Order Continuous Time Dynamic Models with Mixed Stock and Flow Data," Econometric Theory, Cambridge University Press, vol. 2(03), pages 350-373, December.
    6. Gordon Fisher & Michael McAleer & Diana Whistler, 1980. "Interest Rates and Durability in the Linear Expenditure Family," Working Papers 399, Queen's University, Department of Economics.
    7. Chambers, Marcus J., 1990. "Forecasting with demand systems : A comparative study," Journal of Econometrics, Elsevier, pages 363-376.
    8. Bergstrom, A. R., 1985. "The Estimation of Parameters in Nonstationary Higher Order Continuous-Time Dynamic Models," Econometric Theory, Cambridge University Press, vol. 1(03), pages 369-385, December.
    9. Bergstrom, A.R., 1987. "Optimal control in wide-sense stationary continuous-time stochastic models," Journal of Economic Dynamics and Control, Elsevier, vol. 11(3), pages 425-443, September.
    10. Peter B. Dixon & Constantino Lluch, 1977. "Durable Goods in the Extended Linear Expenditure System," Review of Economic Studies, Oxford University Press, vol. 44(2), pages 381-384.
    11. Hall, A D & McAleer, Michael, 1989. "A Monte Carlo Study of Some Tests of Model Adequacy in Time Series Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(1), pages 95-106, January.
    12. Gordon Fisher & Michael McAleer & Diana Whistler, 1981. "Interest Rates and Durability in the Linear Expenditure Family," Canadian Journal of Economics, Canadian Economics Association, vol. 14(2), pages 331-341, May.
    13. Anderson, Gordon & Blundell, Richard, 1984. "Consumer Non-Durables in the U.K. A Dynamic Demand System," Economic Journal, Royal Economic Society, vol. 94(376a), pages 35-44, Supplemen.
    14. Bergstrom, Albert Rex, 1983. "Gaussian Estimation of Structural Parameters in Higher Order Continuous Time Dynamic Models," Econometrica, Econometric Society, vol. 51(1), pages 117-152, January.
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    Cited by:

    1. Anton Bondarev, 2008. "Evaluation of Demand Functions for foodstuffs in Russian Economy in 1999–2004," Research Paper Series, Gaidar Institute for Economic Policy, pages 166-166.
    2. Chambers, MJ & McCrorie, JR & Thornton, MA, 2017. "Continuous Time Modelling Based on an Exact Discrete Time Representation," Economics Discussion Papers 20497, University of Essex, Department of Economics.

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