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Forecasting ability of theory-constrained two-stage demand systems

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  • Geir Wæhler Gustavsen

Abstract

Demand models are commonly used to forecast effects of policy changes and two-stage demand systems are frequently used when disaggregated food items are involved. A two-stage system implies interconnections between the stages. These interconnections can be modelled to make unconditional forecasts, or the second stage can be modelled separately to make conditional forecasts. We compare conditional and unconditional elasticity-based and direct statistical forecasts. For our data, conditional forecasts are superior to unconditional forecasts and forecasts derived from elasticities are superior to direct statistical forecasts. Imposition of the homogeneity and symmetry restrictions of consumer theory does not improve the forecasts. Copyright 2003, Oxford University Press.

Suggested Citation

  • Geir Wæhler Gustavsen, 2003. "Forecasting ability of theory-constrained two-stage demand systems," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 30(4), pages 539-558, December.
    • Handle: RePEc:oup:erevae:v:30:y:2003:i:4:p:539-558
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    Cited by:

    1. Muhammad, Andrew & Ngeleza, Guyslain K., 2009. "European Union preferential trade agreements with developing countries and their impact on Colombian and Kenyan carnation exports to the United Kingdom:," IFPRI discussion papers 862, International Food Policy Research Institute (IFPRI).
    2. Gustavsen, Geir Waehler & Rickertsen, Kyrre, 2008. "Consumer Cohorts and Milk Purchases," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43551, European Association of Agricultural Economists.
    3. Gustavsen, Geir Wæhler & Rickertsen, Kyrre, 2018. "Consumer cohorts and the demand for meat and dairy products," 2018 International European Forum (163rd EAAE Seminar), February 5-9, 2018, Innsbruck-Igls, Austria 276865, International European Forum on System Dynamics and Innovation in Food Networks.
    4. Ana Gil & José Molina, 2009. "Alcohol demand among young people in Spain: an addictive QUAIDS," Empirical Economics, Springer, vol. 36(3), pages 515-530, June.
    5. Geir Gustavsen & Kyrre Rickertsen, 2014. "Consumer cohorts and purchases of nonalcoholic beverages," Empirical Economics, Springer, vol. 46(2), pages 427-449, March.

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