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Instrument-free Identifcation and Estimation of the Diferentiated Products Models

Author

Listed:
  • David P. Byrne

    (Department of Economics, University of Melbourne)

  • Susumu Imai

    (Economics Discipline Group, University of Technology Sydney and Queen's University)

  • Vasilis Sarafidis

    (Dept. of Econometrics and Business Statistics, Monash University)

Abstract

We derive restrictions for Granger noncausality in Markov-switching vector autoregressive models and also show under which conditions a variable does not affect the forecast of the hidden Markov process. Based on Bayesian approach to evaluating the hypotheses, the computational tools for posterior inference include a novel block Metropolis-Hastings sampling algorithm for the estimation of the restricted models. We analyze a system of monthly US data on money and income. The results of testing in MS-VARs contradict those in linear VARs: the money aggregate M1 is useful for forecasting income and for predicting the next period’s state.

Suggested Citation

  • David P. Byrne & Susumu Imai & Vasilis Sarafidis, 2015. "Instrument-free Identifcation and Estimation of the Diferentiated Products Models," Department of Economics - Working Papers Series 1198, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:1198
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    References listed on IDEAS

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    More about this item

    Keywords

    differentiated goods oligopoly; instrument-free; parametric identification; non-parametric identification; cost data;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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