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Car ownership and use in Britain: a comparison of the empirical results of alternative cointegration estimation methods and forecasts

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  • Peter Romilly
  • Haiyan Song
  • Xiaming Liu

Abstract

This paper addresses two problems faced by many forecasters in the transport sector, namely how to use a relatively small sample to forecast car ownership over a long period of time and avoid the difficulties caused by spurious or nonsense regressions. Five alternative estimation methods are used to test for cointegrating relationships between per capita car ownership (and use) and real per capita personable disposable income, real motoring costs and real bus fares. These are the Engle-Granger two-stage, the Phillips-Hansen fully modified, the Wickens-Breusch one-stage, the autoregressive distributed lag, and the Johansen maximum likelihood methods. The corresponding error correction models are estimated, and a comparison made between the derived short- and long-run demand elasticities for car ownership and use. The ex-post forecasting performance of the error correction models, together with an ARIMA model specification, is evaluated using a number of performance criteria. The long-range time series forecasts obtained from the cointegrating regressions are compared with those from the cross-sectional approach used by the UK Department of the Environment, Transport and the Regions, and the policy implications discussed.

Suggested Citation

  • Peter Romilly & Haiyan Song & Xiaming Liu, 2001. "Car ownership and use in Britain: a comparison of the empirical results of alternative cointegration estimation methods and forecasts," Applied Economics, Taylor & Francis Journals, vol. 33(14), pages 1803-1818.
  • Handle: RePEc:taf:applec:v:33:y:2001:i:14:p:1803-1818
    DOI: 10.1080/00036840011021708
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    References listed on IDEAS

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    1. Pesaran, M.H. & Shin, Y., 1995. "An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis," Cambridge Working Papers in Economics 9514, Faculty of Economics, University of Cambridge.
    2. Pesaran, M. H. & Shin, Y. & Smith, R. J., 1996. "Testing for the 'Existence of a Long-run Relationship'," Cambridge Working Papers in Economics 9622, Faculty of Economics, University of Cambridge.
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