International Telecommunications Forecasting: an Investigation of Alternative Functional Forms

Abstract

This paper provides an investigation of alternative models of international telecommunications traffic for several of the main streams emanating from Australia. Specifically, several alternative functional forms are compared with the standard double-log specification so often used in such studies. The motivation for such a study is twofold. In the first place, the double-log specification generates elasticities that are constant over time. Given the intertemporal changes in the budget share of telecommunications, this may not be a resonable formulation. The second motivation derives from teh need to use the demand models to forecast. Although the double-log model may provide a good within-sample fit, this is no gurantee that it will provide good post-sample forecasts.