Estimating Structural Change with Smooth Transition Regressions: an Application to Meat Demand

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)

Abstract

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
• Language: English
• 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 ; Diffusion Processes ; State Space 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

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