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Consumer Expenditure and Cointegration

Carlos Marques () and Pedro Duarte Neves

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: In this paper we estimate the Almost Ideal Demand System (AIDS) for the Portuguese economy. The budget shares and real per capita income are found to be integrated of order one, I(1), but prices seem to be better classified as I(2). This raises new problems, as it is not possible to test for homogeneity and symmetry in a straightforward way. As cointegration is not rejected after the imposition of homogeneity and symmetry restrictions, we conclude that the AIDS is an acceptable characterisation of the Portuguese data on consumer expenditure.

JEL-codes: C33 D12 (search for similar items in EconPapers)
Date: 1998
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