Arbeitspapier

Expectations in Export Price Formation Tests using Cointegrated VAR Models

The formation of export prices is an area in which the linear quadratic adjustment cost (LQAC) model under rational expectations may be relevant in practice. This paper evaluates the empirical performance of the LQAC-model using Norwegian data and a new testing procedure suggested by Johansen and Swensen (1999). We find, however, that the model can be rejected for our data set. Conversely, we show in light of Hendry (1988) that there exists a data-coherent conditional equilibrium correction (EqCM) model, which is not subject to the Lucas critique. Our findings do not support the claim that Norwegian exporters act on expectations based models in the formation of prices.

Language
Englisch

Bibliographic citation
Series: Discussion Papers ; No. 283

Classification
Wirtschaft
Model Construction and Estimation
Model Evaluation, Validation, and Selection
Expectations; Speculations
Price Level; Inflation; Deflation
Subject
Expectations
export prices
LQAC-model
cointegrated VAR
EqCM-model
exogeneity
Lucas critique.

Event
Geistige Schöpfung
(who)
Boug, Pål
Cappelen, Ådne
Swensen, Anders R.
Event
Veröffentlichung
(who)
Statistics Norway, Research Department
(where)
Oslo
(when)
2000

Handle
Last update
10.03.2025, 11:44 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Boug, Pål
  • Cappelen, Ådne
  • Swensen, Anders R.
  • Statistics Norway, Research Department

Time of origin

  • 2000

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