Holt, Matthew T. and Balagtas, Joseph V. (2009): Estimating Structural Change with Smooth Transition Regressions: an Application to Meat Demand. Forthcoming in: American Journal of Agricultural Economics , Vol. 91, No. 5 (2009)
Download (5MB) | Preview
This paper explores the role of structural change in systems of demand equations. Specifically, we adapt the time—varying regression framework of Lin and Teräsvirta (1994), which in turn is related to the dynamic smooth transition models introduced by Teräsvirta (1994). Unlike previous efforts at modeling structural change in demand systems, we do not impose the nature of the change to be monotonic—several non-monotonic alternatives are considered. An application is presented using the Almost Ideal Inverse Demand System (IAIDS) applied to U.S. meat demand data, 1960-2004. Results show the importance of modeling structural change and that, moreover, the best-fitting model is associated with a form of symmetric, non-monotonic structural change.
|Item Type:||MPRA Paper|
|Original Title:||Estimating Structural Change with Smooth Transition Regressions: an Application to Meat Demand|
|Keywords:||Inverse Almost Ideal Demand System; Meat Demand; Structural Change; Time-Varying Regression|
|Subjects:||C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C32 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q1 - Agriculture > Q11 - Aggregate Supply and Demand Analysis; Prices
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C12 - Hypothesis Testing: General
|Depositing User:||Matthew T. Holt|
|Date Deposited:||21. May 2009 13:58|
|Last Modified:||16. Feb 2013 00:50|
Alston, J. M. and J. A. Chalfant (1991). Can we take the con out of meat demand studies? Western Journal of Agricultural Economics 16, 36–48.
Andrews, D. W. K. (1993). Tests for parameter instability and structural change with unknown change point. Econometrica 61 (4), 821–856.
Andrews, D. W. K. and W. Ploberger (1994). Optimal tests when a nuisance parameter is present only under the alternative. Econometrica 62 (6), 1383–1414.
Barten, A. P. (1969). Maximum likelihood estimatiion of a complete system of demand equations. Europen Economic Review 1, 7–63.
Barten, A. P. and L. J. Bettendorf (1989). Price formation of fish : An application of an inverse demand system. European Economic Review 33 (8), 1509 –1525.
Bryant, H. L. and G. C. Davis (2008). Revisiting aggregate U.S. meat demand with a Bayesian averaging of classical estimates approach: Do we need a more general theory? American Journal of Agricultural Economics 90 (1), 103–116.
Chavas, J.-P. (1983). Structural change in the demand for meat. American Journal of Agricultural Economics 65 (1), 148–153.
Chow, G. C. (1960). Tests of equality between sets of coefficients in two linear regressions. Econometrica 28 (3), 591–605.
Dahlgran, R. A. (1987). Complete flexibility systems and the stationarity of U.S. meat demand. Western Journal of Agricultural Economics 12, 152–163.
Davies, R. B. (1977). Hypothesis testing when a nuisance parameter is present only under the alternative. Biometrika 64 (2), 247–254.
Davies, R. B. (1987). Hypothesis testing when a nuisance parameter is present only under the alternatives. Biometrika 74 (1), 33–43.
Davis, G. C. (1997). The logic of testing structural change in meat demand: A methodological analysis and appraisal. American Journal of Agricultural Economics 79 (4), 1186–1192.
Deaton, A. and J. Muellbauer (1980). An Almost Ideal Demand System. American Economic Review 70 (3), 312–326.
Eales, J. S. and L. J. Unnevehr (1988). Demand for beef and chicken products: Separability and structural change. American Journal of Agricultural Economics 70 (3), 521–532.
Eales, J. S. and L. J. Unnevehr (1994). The inverse almost ideal demand system. European Economic Review 38 (1), 101 – 115.
Farley, J. U., M. Hinich, and T. W. McGuire (1975). Some comparisons of tests for a shift in the slopes of a multivariate linear time series model. Journal of Econometrics 3 (3), 297–318.
Goodwin, B. K. and G. W. Brester (1995). Structural change in factor demand relationships in the U.S. food and kindred products industry. American Journal of Agricultural Economics 77 (1), 69–79.
Goodwin, B. K., D. Harper, and R. Schnepf (2003). Short run demand relationships in the U.S. fats and oils complex. Journal of Agricultural and Applied Economics 35 (1), 171–184.
Hansen, B. E. (1996). Inference when a nuisance parameter is not identified under the null hypothesis. Econometrica 64 (2), 413–430.
Holt, M. T. (1998). Autocorrelation specification in singular equation systems: A further look. Economics Letters 58, 135–141.
Holt, M. T. (2002). Inverse demand systems and choice of functional form. European Economic Review 46, 117–142.
Holt, M. T. and B. K. Goodwin (1996). Generalized habit formation in an inverse almost ideal demand system: An application to meat expenditures in the U.S. Empirical Economics 78 (5), 1396–1396.
Lin, J. C.-F. and T. Ter¨asvirta (1994). Testing for the constancy of regression parameters against continuous structural change. Journal of Econometrics 62 (2), 211–228.
Luukkonen, R., P. Saikkonen, and T. Tersvirta (1988). Testing linearity against smooth transition autoregressive models. Biometrika 75 (3), 491–499.
Moschini, G. and K. D. Mielke (1989). Modelling the pattern of structural change in U.S. meat demand. American Journal of Agricultural Economics 71, 253–261.
Pollak, R. A. and T. J. Wales (1991). The likelihood dominance criterion : A new approach to model selection. Journal of Econometrics 47 (2–3), 227–242.
Seo, M. (2006). Bootstrap testing for the null of no cointegration in a threshold vector error correction model. Journal of Econometrics 134 (1), 129 – 150.
Skalin, J. (1998, December 13). Testing linearity against smooth transition autoregresison using a parametric bootstrap. Stochkholm School of Economics Working Paper Series in Economics and Finance No. 276.
Terasvirta, T. (1994). Specification, estimation, and evaluation of smooth transition autoregressive models. Journal of the American Statistical Association 89 (425), 208–218.
U.S. Department of Agriculture (2006a, August). Economic resaerch service. poultry yearbook. Online. Stock No. 89007.
U.S. Department of Agriculture (2006b, January). Economic research service. red meat yearbook. Online Publication. Stock No. 94006. 14