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A Note On Problems of Estimating the Linear Expenditure System and Its Related Forms

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  • Fisher, Gordon
  • McAleer, Michael
  • Whistler, Diana

Abstract

In this note estimates are presented of the Linear Expenditure System (LES), the Extended Linear Expenditure System (ELES) and the Extended Linear Expenditure System with Durables (DELES), under each of two alternative error specifications. Seasonally adjusted, quarterly Australian data for the period 1959(4) - 1976(2) are used. The main purpose is to gauge the contribution of DELES to the family of linear expenditure systems. Three practical matters are emphasized: (i) sensitivity to error specification; (ii) the role of a priori fixed decay rates in achieving numerical convergence in estimation; and (iii) numerical identification of the subjective time-preference and market interest rate parameters. The last of these turns out to be most important in determining the limiting properties of the model and in appraising the practical viability of DELES vis-a-vis the other two members of the LES family.

Suggested Citation

  • Fisher, Gordon & McAleer, Michael & Whistler, Diana, 1979. "A Note On Problems of Estimating the Linear Expenditure System and Its Related Forms," Queen's Institute for Economic Research Discussion Papers 275153, Queen's University - Department of Economics.
    • Handle: RePEc:ags:queddp:275153
    DOI: 10.22004/ag.econ.275153
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    References listed on IDEAS

    as
    1. Lluch, Constantino, 1973. "The extended linear expenditure system," European Economic Review, Elsevier, vol. 4(1), pages 21-32, April.
    2. Beach, Charles M & MacKinnon, James G, 1979. "Maximum Likelihood Estimation of Singular Equation Systems with Autoregressive Disturbances," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(2), pages 459-464, June.
    3. Michael McAleer & Alan A. Powell & Peter Dixon & Tony Lawson, 1979. "Estimation of the Consumption Function: A Systems Approach to Employment Effects on the Purchases of Durables," Working Paper 349, Economics Department, Queen's University.
    4. Peter B. Dixon & Constantino Lluch, 1977. "Durable Goods in the Extended Linear Expenditure System," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(2), pages 381-384.
    5. Michael McAleer & Ian E. Gorman, 1979. "Durable Goods in the Extended Linear Expenditure System: An Empirical Appraisal," Working Paper 333, Economics Department, Queen's University.
    6. Berndt, Ernst R & Savin, N Eugene, 1975. "Estimation and Hypothesis Testing in Singular Equation Systems with Autoregressive Disturbances," Econometrica, Econometric Society, vol. 43(5-6), pages 937-957, Sept.-Nov.
    7. A. A. Powell, 1973. "An ELES Consumption Function for the United States," The Economic Record, The Economic Society of Australia, vol. 49(3), pages 337-357, September.
    8. Powell, A A, 1973. "An ELES Consumption Function for the United States," The Economic Record, The Economic Society of Australia, vol. 49(127), pages 337-357, September.
    9. Constantino Lluch & R. Williams, 1975. "Consumer Demand Systems and Aggregate Consumption in the US: An Application of the Extended Linear Expenditure System," Canadian Journal of Economics, Canadian Economics Association, vol. 8(1), pages 49-66, February.
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