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Intercountry Evidence On The Performance Of The Simple Error Correction Mechanism Model Of Consumption




This paper estimates a simple error correction mechanism (SECM) model of consumption a la Davidson, Hendry, Srba and Yeo (1978) for 13 OECD countries over the period 1951-82. This is done for each country separately as well as for the pooled data. The basic results of this study are the following: (1) The SECM model appears as an adequate approximation to the data generating process on an individual country basis as well as in a pooled context. (2) The pooled within estimator indicates a large and significant disequilibrium term while the between estimator indicates a small and insignificant disequilibrium term. This is consistent with the belief that the within estimator tend to yield short-run estimates while the between estimator tend to yield long-run estimates.
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  • Baltagi, B.H. & Mokhtari, M., 1988. "Intercountry Evidence On The Performance Of The Simple Error Correction Mechanism Model Of Consumption," Papers 4, Houston - Department of Economics.
  • Handle: RePEc:fth:housto:4

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    consumption ; evaluation ; models;


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