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Consumer Expenditure and Cointegration


  • Carlos Robalo Marques
  • Pedro Duarte Neves


In this paper we estimate the Almost Ideal Demand System (AIDS) for the Portuguese economy. The budget shares and real per capita income are found to be integrated of order one, I(1), but prices seem to be better classified as I(2). This raises new problems, as it is not possible to test for homogeneity and symmetry in a straightforward way. As cointegration is not rejected after the imposition of homogeneity and symmetry restrictions, we conclude that the AIDS is an acceptable characterisation of the Portuguese data on consumer expenditure.

Suggested Citation

  • Carlos Robalo Marques & Pedro Duarte Neves, 1998. "Consumer Expenditure and Cointegration," Working Papers w199806, Banco de Portugal, Economics and Research Department.
  • Handle: RePEc:ptu:wpaper:w199806

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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis


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