Regularity and Long-run Dynamics in Consumer Demand Systems

Arbeitspapier

This paper deals with the regularity problem in the Almost Ideal Demand System (AIDS) in terms of the boundedness of the budget shares within the [0,1] interval. The violation of "cointegration accounting" can be seen just as another consequence of irregularity. The discussion of modifications in the PIGLOG cost functions leads to the proposition of a modified flexible PIGLOG formulation, from which a system of budget shares can be derived, which ensures regularity and validity of "cointegration accounting". A special feature of the resulting share equations is the divergence from the time path of the AIDS shares over time and therefore better budget share forecasts. This property is shown empirically with long run forecasts from demand systems estimated for consumers demand of some European economies.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WIFO Working Papers ; No. 217

Classification and Topics

• Classification: Wirtschaft ; Consumer Economics: Theory ; Consumer Economics: Empirical Analysis ; Multiple or Simultaneous Equation Models; Multiple Variables: General ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
• Subject: AIDS model ; PIGLOG specification ; Konsumtheorie ; Nachfragesystem ; Österreich ; Dänemark ; Finnland

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kratena, Kurt ; Wüger, Michael ; Zakarias, Gerold
• Event: Veröffentlichung
• (who): Austrian Institute of Economic Research (WIFO)
• (where): Vienna
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/128773
• Last update: 10.03.2025, 11:42 AM CET