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Dynamic specification and misspecification in systems of demand equations: a testing strategy for model selection

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  • Ghazi Shukur

Abstract

The purpose of this study is to describe a misspecification testing strategy that is designed to ensure the appropriateness of the statistical assumptions underlying a system of equations. A systemwise test approach is used to test the statistical assumptions. The systemwise tests take into account information in, and interaction between, all equations in the system and can be used in a wide variety of applications where systems of equations are estimated. If the systemwise test leads to rejection, single equation F-test will then be used to help identify specific problems. The systemwise testing approach is illustrated by modelling Swedish consumer demand for milk. The example illustrates how the approach can be used to solve issues regarding dynamic specification of models, structural change and other forms of model misspecification.

Suggested Citation

  • Ghazi Shukur, 2002. "Dynamic specification and misspecification in systems of demand equations: a testing strategy for model selection," Applied Economics, Taylor & Francis Journals, vol. 34(6), pages 709-725.
    • Handle: RePEc:taf:applec:v:34:y:2002:i:6:p:709-725
    DOI: 10.1080/00036840110048465
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    Cited by:

    1. Zhou, De & Yu, Xiaohua & Herzfeld, Thomas, 2015. "Dynamic food demand in urban China," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 7(1), pages 27-44.
    2. Filippini, M. & Masiero, G. & Moschetti, K., 2009. "Regional consumption of antibiotics: A demand system approach," Economic Modelling, Elsevier, vol. 26(6), pages 1389-1397, November.
    3. Mona Chitnis & Roger Fouquet & Steve Sorrell, 2020. "Rebound Effects for Household Energy Services in the UK," The Energy Journal, , vol. 41(4), pages 31-60, July.
    4. Dogbe, Wisdom, 2022. "Implications of increasing fruits and vegetable consumption in Scotland," 96th Annual Conference, April 4-6, 2022, K U Leuven, Belgium 321232, Agricultural Economics Society - AES.
    5. Chitnis, Mona & Sorrell, Steve, 2015. "Living up to expectations: Estimating direct and indirect rebound effects for UK households," Energy Economics, Elsevier, vol. 52(S1), pages 100-116.
    6. Tullaya Boonsaeng & Michael K. Wohlgenant, 2009. "A Dynamic Approach to Estimating and Testing Separability in U.S. Demand for Imported and Domestic Meats," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 57(1), pages 139-157, March.
    7. Bahadır Yüzbaşı & S. Ejaz Ahmed, 2020. "Ridge Type Shrinkage Estimation of Seemingly Unrelated Regressions And Analytics of Economic and Financial Data from “Fragile Five” Countries," JRFM, MDPI, vol. 13(6), pages 1-19, June.
    8. Salman, Khalik & Arnesson, Leif & Sörensson, Anna & Shukur, Ghazi, 2009. "Estimating the Swedish and Norwegian International Tourism Demand using ISUR Technique," Working Paper Series in Economics and Institutions of Innovation 198, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    9. Fernando López & Jesús Mur & Ana Angulo, 2014. "Spatial model selection strategies in a SUR framework. The case of regional productivity in EU," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(1), pages 197-220, August.
    10. Boonsaeng, Tullaya & Wohlgenant, Michael K., 2006. "Testing Separability between Import and Domestic Commodities: Application to U.S. Meat Demand in a Dynamic Model," 2006 Annual Meeting, February 5-8, 2006, Orlando, Florida 35267, Southern Agricultural Economics Association.
    11. Ngo, Quang Thanh, 2016. "Farmers’ adaptive measures to climate change induced natural shocks through past climate experiences in the Mekong River Delta, Vietnam," MPRA Paper 78055, University Library of Munich, Germany.

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