Aliternative methods for estimating long-run responses with applications to australian import demand

Abstract

This paper compares and contrasts a number of single-equation and systems estimators of long-run responses with application to a three-variable import demand model. Two variants of Box and Tiao's (1977) canonical estimator are developed and associated tests for the number of cointegrating vectors are introduced. A simulation study indicates that, while both Box-Tiao estimators have empirical distributions with fatter tails than the normal, there is evidence that the incidence of extreme values is even greater with Johansen's (1988) ML procedure.