Conditional Correlation Demand Systems

Apostolos Serletis and Libo Xu
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Libo Xu: University of San Francisco

Computational Economics, 2020, vol. 56, issue 1, No 5, 77-86

Abstract: Abstract We address the estimation of singular demand systems with heteroscedastic disturbances. As in Serletis and Isakin (Econ Rev 36:1111–1122, 2017) and Serletis and Xu (Empir Econ, 2019, forthcoming) we assume that the covariance matrix of the errors of the demand system is time-varying, and contribute to the literature by considering the constant conditional correlation and dynamic conditional correlation parameterizations of the variance model. We derive a number of important practical results and also provide an empirical application to support our methodology.

Keywords: Flexible functional forms; Demand systems; Volatility (search for similar items in EconPapers)
JEL-codes: C32 E44 E52 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Conditional Correlation Demand Systems (2018)
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DOI: 10.1007/s10614-018-9874-x

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