A system of demand equations for Austria

Abstract

This paper presents results of parameter estimations of a small system of demand equations for Austria. The functional form of the equations follows the log-linear specification well known as the “Rotterdam”-System. Using annual data from 1954 to 1977 we estimate the absolute price version for a rather aggregated system consisting of four sectors of consumption expenditures. Aitken estimation with and without linear restrictions is the adopted estimation method. Tests for the validity of the general linear restrictions axe performed employing the usual criteria. Relations among the test statistics are discussed. Taking into accountBeaton's [1972] argument of the appropriate use of likelihood ratio tests we present results also after iterating on the restricted error-covariance matrix.

The question of negative semidefiniteness of the matrix of price coefficients is examined by inspection of its characteristic roots and the calculation of their approximated asymptotic covariance matrix. Finally, our results are confronted with such of other comparable studies.