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Model Selection and Forecasting Ability of Theory-Constrained Food Demand Systems

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  • Terry L. Kastens
  • Gary W. Brester

Abstract

Out-of-sample forecasting of annual U.S. per capita food consumption, applying data from 1923 to 1992, is used as a basis for model selection among the absolute price Rotterdam model, a first-differenced linear approximate almost ideal demand system (FDLA/ALIDS) model, and a first-differenced double-log demand system. Conditional-on-price consumption forecasts derived from elasticities are determined to be superior to direct statistical model forecasts. Models with consumer theory imposed through parametric restrictions provide better forecasts than models with little theory-imposition. For these data, a double-log demand system is a superior forecaster to the Rotterdam model, which is superior to the FDLA/ALIDS model. Copyright 1996, Oxford University Press.

Suggested Citation

  • Terry L. Kastens & Gary W. Brester, 1996. "Model Selection and Forecasting Ability of Theory-Constrained Food Demand Systems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 301-312.
  • Handle: RePEc:oup:ajagec:v:78:y:1996:i:2:p:301-312
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    1. Brester, Gary W. & Lhermite, Pascale & Goodwin, Barry K. & Hunt, Melvin C., 1993. "Quantifying The Effects Of New Product Development: The Case Of Low-Fat Ground Beef," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 0(Number 2), pages 1-12, December.
    2. Jeffrey T. LaFrance, 1986. "The Structure of Constant Elasticity Demand Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(3), pages 543-552.
    3. Giancarlo Moschini & Daniele Moro & Richard D. Green, 1994. "Maintaining and Testing Separability in Demand Systems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(1), pages 61-73.
    4. Ashley, R & Granger, C W J & Schmalensee, R, 1980. "Advertising and Aggregate Consumption: An Analysis of Causality," Econometrica, Econometric Society, vol. 48(5), pages 1149-1167, July.
    5. Alston, Julian M. & Chalfant, James A., 1991. "Can We Take The Con Out Of Meat Demand Studies?," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 0(Number 1), pages 1-13, July.
    6. Waugh, Frederick V., 1964. "Demand and Price Analysis," Technical Bulletins 171213, United States Department of Agriculture, Economic Research Service.
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