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Selection of Nonnested Demand Models
Author(s) -
Green Richard D.,
Hassan Zuhair A.,
Johnson S. R.
Publication year - 1995
Publication title -
canadian journal of agricultural economics/revue canadienne d'agroeconomie
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 37
eISSN - 1744-7976
pISSN - 0008-3976
DOI - 10.1111/j.1744-7976.1995.tb00137.x
Subject(s) - almost ideal demand system , cointegration , econometrics , dominance (genetics) , selection (genetic algorithm) , model selection , set (abstract data type) , ideal (ethics) , computer science , economics , statistics , mathematics , demand management , macroeconomics , chemistry , biochemistry , philosophy , gene , epistemology , artificial intelligence , programming language
This paper applies the likelihood dominance criterion (LDC), a new method of model selection developed by Pollak and Wales (1991), to four popular demand equation systems, using a set of seasonally adjusted quarterly Canadian data series. the results indicate that the almost ideal demand system (AIDS) dominates various alternative demand systems. the LDC method is useful in assisting demand analysts in selecting the proper demand specification. the paper also includes tests for unit roots and cointegration and, based on these tests, an error corrections model is estimated and tested against the popular but not theoretically plausible linear approximate almost ideal demand system.