Time‐varying intercepts and equilibrium analysis: an extension of the dynamic almost ideal demand model | Zendy

Deschamps Philippe J. | Zendy

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Time‐varying intercepts and equilibrium analysis: an extension of the dynamic almost ideal demand model

Author(s) -

Deschamps Philippe J.

Publication year - 2002

Publication title -

journal of applied econometrics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 2.878

H-Index - 99

eISSN - 1099-1255

pISSN - 0883-7252

DOI - 10.1002/jae.674

Subject(s) - unobservable , markov chain monte carlo , econometrics , state space , autoregressive model , bayesian probability , markov chain , cointegration , extension (predicate logic) , almost ideal demand system , monte carlo method , computer science , lag , economics , mathematics , statistics , demand management , programming language , computer network , macroeconomics

Demographic effects and user costs in demand systems have usually been modelled explicitly. A more robust approach is a state space formulation of the demand system, where time‐varying intercepts account for the effects of unobservable variables. The author embeds such a system in a vector autoregressive distributed lag model, with a Bayesian hierarchical prior. The model is estimated by a Markov chain Monte Carlo method on samples involving quarterly US and UK data. In the US case, the results are compared with a previously published cointegration analysis of the same data. Copyright © 2002 John Wiley & Sons, Ltd.

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