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Restriction Implied (restriction + implied)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Cointegration, Government Spending and Private Consumption: Evidence from Japan

THE JAPANESE ECONOMIC REVIEW, Issue 2 2004
Tsung-Wu Ho
Assuming a CRRA preference, this paper shows that there is a cointegration restriction implied by the intra-temporal first-order condition in the consumption function. This restriction predicts a cointegrated system of government consumption, private consumption, and their relative price. Our analysis indicates that, first, Johansen's VECM confirms the theoretical prediction that is supported by the data of Japan; moreover, Bierens' (1997) nonparametric estimator severely contradicts with the theoretical model and fits the data poorly; second, Japanese people have increasing willingness to rearrange their consumption over time. Besides, the intratemporal relationship between private and government consumption remains relatively stable over time. [source]

The Intratemporal Substitution between Government Spending and Private Consumption: Empirical Evidence from Taiwan

ASIAN ECONOMIC JOURNAL, Issue 3 2001
Ru-Lin ChiuArticle first published online: 18 DEC 200
In this paper, we investigate the idea that a general model of consumption should allow for the direct effect of government consumption. We show, given an assumed preference specification, that there is a cointegration restriction implied by an intraperiod first-order condition of the model. This restriction leads to a linear deterministic cointegrated system of government consumption, private consumption and their relative price that is consistent with the data for Taiwan. The intratemporal elasticity of substitution between government and private consumption is estimated to be about 1.1. Overall, we find consistent empirical evidence in support of our model. [source]

Land of addicts? an empirical investigation of habit-based asset pricing models

JOURNAL OF APPLIED ECONOMETRICS, Issue 7 2009
Xiaohong Chen
This paper studies the ability of a general class of habit-based asset pricing models to match the conditional moment restrictions implied by asset pricing theory. We treat the functional form of the habit as unknown, and estimate it along with the rest of the model's finite dimensional parameters. Using quarterly data on consumption growth, assets returns and instruments, our empirical results indicate that the estimated habit function is nonlinear, that habit formation is better described as internal rather than external, and the estimated time-preference parameter and the power utility parameter are sensible. In addition, the estimated habit function generates a positive stochastic discount factor (SDF) proxy and performs well in explaining cross-sectional stock return data. We find that an internal habit SDF proxy can explain a cross-section of size and book-market sorted portfolio equity returns better than (i) the Fama and French (1993) three-factor model, (ii) the Lettau and Ludvigson (2001b) scaled consumption CAPM model, (iii) an external habit SDF proxy, (iv) the classic CAPM, and (v) the classic consumption CAPM. Copyright © 2009 John Wiley & Sons, Ltd. [source]

Normalization in cointegrated time series systems

CANADIAN JOURNAL OF ECONOMICS, Issue 4 2009
Robert J. Rossana
Abstract A method for normalizing cointegrating vectors is proposed for cointegrated time series systems containing multiple cointegrating vectors, a method requiring that an identity matrix appear in the normalized cointegrating matrix with unit coefficients attached to the endogenous or choice variables. The preferred method causes the normalized cointegrating matrix and the adjustment matrix to be consistent with the implications of static and dynamic economic theory. Alternative normalizations generate cointegrating and adjustment matrices that do not match up well with economic theory and do not reveal the testable restrictions implied by static economic theory. On propose une méthode pour normaliser les vecteurs co-intégrants pour des systèmes de séries chronologiques co-intégrées contenant de multiples vecteurs co-intégrants. Cette méthode requiert qu'une matrice identitaire apparaisse dans la matrice co-intégrante normalisée avec des coefficients unitaires attachés aux variables endogènes et de choix. La méthode préférée assure que la matrice co-intégrante normalisée et la matrice d'ajustement soient consistantes avec les implications de la théorie économique statique et dynamique. Des normalisations de rechange engendrent des matrices qui s'arriment mal à la théorie économique et ne révèlent pas les restrictions vérifiables impliquées par la théorie statique. [source]