Forecasting with the almost ideal demand system: evidence from some alternative dynamic specifications

Marcus Chambers and K. Ben Nowman

Applied Economics, 1997, vol. 29, issue 7, 935-943

Abstract: The almost ideal demand system is used as a representation of long run demands in discrete time and continuous time error correction models to produce forecasts of budget shares beyond the sample period. The estimated models are subjected to a battery of tests, and an analysis of the forecasts indicates that continuous time adjustment mechanisms, based around fully modified estimates of the long run preference parameters, provide a remarkably accurate method of forecasting budget shares.

Date: 1997
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DOI: 10.1080/000368497326598

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