The problem of changing parameters in demand analysis and forecasting

Juhani Rouhiainen

European Review of Agricultural Economics, 1978, vol. 5, issue 3-4, 349-359

Abstract: Particularly in a demand analysis of long time-series data, the validity of the assumption of a constant regression relationship over time is open to question. The examination of changes in the parameters is of crucial importance if the model is used to make forecasts. To detect such changes, tests based on recursive residuals can be applied. When examining the demand for cereals in Finland between 1950 and 1975, the hypothesis of constancy of the regression parameters was rejected on the basis of these tests. Forecasts of cereal consumption were then made by means of weighted regression technics.

Date: 1978
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European Review of Agricultural Economics is currently edited by Timothy Richards, Salvatore Di Falco, Céline Nauges and Vincenzina Caputo

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