Intercountry Evidence on the Performance of the Simple Error Correction Mechanism Model of Consumption

Badi Baltagi and Manouchehr Mokhtari

Empirical Economics, 1990, vol. 15, issue 4, 303-14

Abstract: This paper estimates a simple error correction mechanism (SECM) model of consumption a la Davidson, Hendry, Srba and Yeo (1978) for 13 OECD countries over the period 1951-82. This is done for each country separately as well as for the pooled data. The basic results of this study are the following: (1) The SECM model appears as an adequate approximation to the data generating process on an individual country basis as well as in a pooled context. (2) The pooled within estimator indicates a large and significant disequilibrium term while the between estimator indicates a small and insignificant disequilibrium term. This is consistent with the belief that the within estimator tend to yield short-run estimates while the between estimator tend to yield long-run estimates.

Date: 1990
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Working Paper: INTERCOUNTRY EVIDENCE ON THE PERFORMANCE OF THE SIMPLE ERROR CORRECTION MECHANISM MODEL OF CONSUMPTION (1988)
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