Dynamic Adjustment Model Research Articles

Residential energy demand in the United States: A regional econometric analysis

A static equilibrium and a dynamic partial adjustment model of residential demand for electricity and natural gas are presented and estimated for the United States over a recent period characterized by sharply increasing energy prices. The static model is estimated using Ordinary Least Squares while the instrumental variables method is used for the dynamic partial adjustment model. The estimates of long-run elasticities suggest the residential demand for electricity and natural gas are price and income elastic. Intercept and slope dummies used in the models identify significant regional differences in demand functions.

The demand for and supply of deposits by credit unions: The Caisses populaires' case

The aim of the study is to explain Quebec major credit union's deposit market by way of intergrating its public demand function with the institution's rate-setting operation. The demand for Caisses' deposits is specified as a dynamic stock adjustment model. On the other hand, the intermediary's rate-setting reduced form is derived from a risk-return portfolio balance model which the managers maximize the expected utility of reserves. The two models are integrated by means of a liability composite rate. Econometric estimates of the integrated model provide us with interesting policy insights. For instance, the Quebecois public views chartered banks' deposits as a weak substitute for Caisses' deposits; it is also more responsive to non-rate arguments, such as loan eligibility or the institution's ethnic appeal. On the supply side, competitive liability rates are more important than returns on assets when the Caisses set its deposit rate. Finally, the impact growth imbalance between loans and deposits is well captured by a flow variable, without infringing on the steady-state determination based on rates.

Importance of Understanding Consumption Dynamics In Market Recovery Periods

Periods of reduced supplies due to exogenous shocks and subsequent high price levels have occurred for many agricultural commodities in the past decade. Consumers' adjustments to these events depend on the magnitude of the shocks and characteristics of the commodity. Understanding consumers' responses to these events requires recognition of rigidities that result in delays in consumer responses to prices.Recognition of rigidities in consumption relationships by using dynamic stock and flow adjustment models was popularized by Houthakker and Taylor [2]. The models recognize the role of inventories and habits resulting from previous purchase patterns in determining current consumption decisions.

A simple dynamic adjustment model of lumber and pulpwood production

(1979). A simple dynamic adjustment model of lumber and pulpwood production. Applied Economics: Vol. 11, No. 4, pp. 367-376.

The Supply Response of Rubber in Thailand

Dynamic adjustment models based on the work of Nerlove [10] have been widely adopted in the analysis of supply for agricultural products. The Nerlovian framework has been extended and modified in recent years to incorporate more complex elements of the supply process and to reflect recent developments in dynamical analysis. Particular emphasis has been put on the analysis of perennial crops where gestation lags introduce problems not ordinarily encountered in the study of annual crops [2, 243-53; 6, 1021-36; 7, 478-90; 12, 433-40]. Rubber is such a crop, having a gestation lag of six or more years and a bearing cycle of thirty years. In this paper a model for the supply response of rubber in Thailand will be constructed and tested. The model incorporates recent developments in dynamical analysis and incorporates a flexible distributed lag specification which can be easily adopted for the supply analysis of other perennial crops.

Alternative Estimates of Static and Dynamic Demand Systems for Canada

AbstractSelected static and dynamic demand systems are applied to Canadian data for the period 1947–1972. Four commodity groups—durables, semi‐durables, services and nondurables—are used for the major portion of the analysis. For the static systems, results for nine commodity groups are provided as a comparison. Income and price elasticity estimates, following from the static systems are, with the exception of the double log, proved reasonably similar. The estimates from the two dynamic systems, the dynamic linear expenditure and state adjustment models, appeared more plausible particularly for services and durable goods, where persistence in consumption patterns is generally observed. As related to other estimates from United States and Canadian data, these results seem to be more stable and more in agreement with a priori reasoning.

THREE MODELS OF FIRM BEHAVIOUR; THEORY AND ESTIMATION, WITH AN APPLICATION TO THE DUTCH MANUFACTURING SECTOR

IN the last decade much research has been done in the field of estimating the parameters of production functions. Quite recently, stress has been laid on obtaining estimates that are logically consistent within the context of a completely specified theoretical model of firm behaviour. As a first attempt, Coen and Hickman (1970) have applied the dynamic adjustment model, suggested by Dhrymes (1967), to the estimation of the parameters of the CobbDouglas (CD) function. In this paper the dynamic adjustment model has been used to estimate the parameters of the Constant Elasticity of Substitution (CES) function. In addition to this theoretical model, two other models of firm behaviour are brought forward and empirically tested, the assumptions underlying these models being deterministic and expected profit maximization, respectively. With regard to the lastmentioned model, a generalization of Hodges' (1969) result is given to include monopsony situations on the factor markets as well as a monopoly situation in the output market. In the field of estimation, a method' is presented which obtains the asymptotic variancecovariance matrix of the various maximum likelihood estimates by means of a direct estimate of the Hessian matrix of the log-likelihood function. This and the application of a direct search method to compute the maximum of the likelihood function, makes it unnecessary to calculate the untractable first and second order derivatives of a non-linear likelihood function, such as the one at hand, and provides a rather easy method for solving similar small-order non-linear estimation problems. The order of discussion will be as follows. First the theoretical models will be derived in section II. Then section III will be devoted to the data and a few problems stemming from aggregation and the use of index numbers. Finally, in section IV the results of the estimation will be presented.

Three Models of Firm Behavior; Theory and Estimation, with an Application to the Dutch Manufacturing Sector

IN the last decade much research has been done in the field of estimating the parameters of production functions. Quite recently, stress has been laid on obtaining estimates that are logically consistent within the context of a completely specified theoretical model of firm behaviour. As a first attempt, Coen and Hickman (1970) have applied the dynamic adjustment model, suggested by Dhrymes (1967), to the estimation of the parameters of the CobbDouglas (CD) function. In this paper the dynamic adjustment model has been used to estimate the parameters of the Constant Elasticity of Substitution (CES) function. In addition to this theoretical model, two other models of firm behaviour are brought forward and empirically tested, the assumptions underlying these models being deterministic and expected profit maximization, respectively. With regard to the lastmentioned model, a generalization of Hodges' (1969) result is given to include monopsony situations on the factor markets as well as a monopoly situation in the output market. In the field of estimation, a method' is presented which obtains the asymptotic variancecovariance matrix of the various maximum likelihood estimates by means of a direct estimate of the Hessian matrix of the log-likelihood function. This and the application of a direct search method to compute the maximum of the likelihood function, makes it unnecessary to calculate the untractable first and second order derivatives of a non-linear likelihood function, such as the one at hand, and provides a rather easy method for solving similar small-order non-linear estimation problems. The order of discussion will be as follows. First the theoretical models will be derived in section II. Then section III will be devoted to the data and a few problems stemming from aggregation and the use of index numbers. Finally, in section IV the results of the estimation will be presented.

An efficient two-step estimator for the dynamic adjustment model with autoregressive errors

An efficient two-step estimator for the dynamic adjustment model with autoregressive errors

The Deficient Treatment of Money in Basic Undergraduate Texts: An Opposing View: Comment

In a recent comment [ 1 ], Samuel C . Webb raised some questions concerning the emphasis and content of undergraduate principles texts. We agree that, generally, the treatment of money is thoroughly inadequate in principles texts. We also recognize that more graphical emphasis has traditionally been given to fiscal policy, and we acknowledge the importance of demonstrating the interrelationship between fiscal and monetary policy. And finally, we accept the prescription that money and monetary policy be given their rightful place in an introductory economics course. However, we do not agree with Professor Webb that Hicks-Hansen or IS-LM analysis is the solution. Hicks-Hansen analysis is not the answer because (1) contrary to his view, it is an extraordinarily difficult concept to teach at the principles level, (2) there are other, better, and simpler tools available which accomplish the same purpose in less time, and (3) we have to act like economists and make sure that within the limited number of contact hours available in the average principles course we maximize the amount of economic understanding our students obtain. The introductory course is not the place to break new theoretical ground, nor is it the place to present the latest developments and theoretical refinements. We realize that Hicks-Hansen analysis is by no means the latest development. It is, however, about as far as economists have pushed macroeconomic analysis unless dynamic adjustment models are included. What Professor Webb seems to overlook is the level of sophistication of the average introductory student and the purpose of most introductory economics courses. We ought not to be trying to produce junior economists in the principles course. Rather, we should be attempting to improve the level of economic literacy of our college graduates. Only a small number of the students in introductory economics courses will major in economics. There is plenty of opportunity and lots of time to teach our majors the intricacies of IS-LM analysis. The question is whether or not the majority of students in our principles courses will