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An Empirical Comparison of Flexible Demand System Functional Forms

Douglas Fisher, Adrian R. Fleissig and Apostolos Serletis
Journal of Applied Econometrics
Vol. 16, No. 1 (Jan. - Feb., 2001), pp. 59-80
Published by: Wiley
Stable URL: http://www.jstor.org/stable/2678537
Page Count: 22
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An Empirical Comparison of Flexible Demand System Functional Forms
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Abstract

This paper compares the performance of eight frequently used flexible forms that are either (1) locally flexible, (2) 'effectively globally regular', or (3) asymptotically globally flexible. Results show that the functions with global properties generally perform better, particularly those models having asymptotic properties. Results, using US consumption data, indicate substitutability among the components of consumption at most data points. There is also some interesting substitution volatility around the time of recessions in the USA.

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