tobacco consumption and policy in the united kingdom in recent years several structural changes and sequences of shocks have occurred in the market for tobacco in the uk including an explosive growth in smuggling this study examines whether it is still possible to estimate a reliable plausible tobacco demand equation from time series data for the uk whilst allowing for all of the various shocks and structural changes a second objective of this study is to use the estimated demand function to evaluate tobacco policy in the uk including the scope for using tax increases to achieve reduced consumption and increased revenues it is found that smuggling has diminished the revenue yield of higher rates of duty but total consumption of tobacco has been reduced in addition to the introduction of further measures to control smuggling policy may need to place more emphasis in the future on health campaigns and smoking restrictions

dynamic limit pricing i study a multiperiod model of limit pricing under one sided incomplete information i characterize pooling and separating equilibria and their existence and determine when these involve limit pricing for some parameter constellations the unique equilibrium surviving a d1 type refinement involves immediate separation on monopoly prices for others there are limit price equilibria surviving the refinement in which different types may initially pool and then possibly separate separation involves setting prices such that the inefficient incumbent s profits from mimicking are negative as the horizon increases or as firms become more patient limit pricing becomes increasingly difficult to sustain in equilibrium

issues involved with the seasonal adjustment of economic time series in the first part of this article we briefly review the history of seasonal adjustment and statistical time series analysis in order to understand why seasonal adjustment methods have evolved into their present form this review provides insight into some of the problems that must be addressed by seasonal adjustment procedures and points out that advances in modem time series analysis raise the question of whether seasonal adjustment should be performed at all this in turn leads to a discussion in the second part of issues involved in seasonal adjustment we state our opinions about the issues raised and review some of the work of other authors first we comment on reasons that have been given for doing seasonal adjustment and suggest a new possible justification we then emphasize the need to define precisely the seasonal and nonseasonal components and offer our definitions finally we discuss criteria for evaluating seasonal adjustments we contend that proposed criteria based on empirical compariso

seasonality and habit persistence in a life cycle model of consumption summary the allocation of non durable consumers expenditure over the four quarters of the year reflects choices made by consumers implying a utility function exhibiting seasonality incorporating such a function the life cycle model fails to explain fully the observed dynamics in uk seasonally unadjusted data seasonal habit persistence effects are introduced and found to be significant although this generalized model stands up well to testing in a univariate context it fails to exclude a predictive role for lagged income changes seasonality is inherent in many economic time series but it is rarely considered to be an issue of interest in econometric model building rather than explicitly investigating the economics underlying seasonal variation modellers typically try to remove its effects either by using seasonally adjusted data or by including seasonal intercept dummies in their equations the former practice is criticized by wallis 1974 who shows that it may distort the relationship between variab le the latter assumes that the function simply shifts up or down with the season however except for degrees of freedom considerations there seems to be no a priori reason why the same parameters or functional form should apply at different times of the year indeed gersovitz and mackinnon 1978 argue that realistic utility cost or production functions result in models in which seasonal influences cannot be separated out in a simple fashion in the present study seasonality is treated as one of the features to be explained within the economic model thus in the particular application to non durable consumers expenditure it is argued that the allocation of expenditure over the year reflects seasonal tastes and hence seasonality in the underlying utility function the implications of this are explicitly investigated the framework for our analysis is the influential paper by hall 1978 who derives a randomwalk model for real non durable consumers expenditure when rational expectations are combined with a life cycle theory of consumption hall does not investigate seasonality at all and employs seasonally adjusted values in his empirical analysis although subsequent us authors have examined many aspects of this theory the type of data used has rarely been

pricing and the news vendor problem a review with extensions in the newsvendor problem a decision maker facing random demand for a perishable product decides how much of it to stock for a single selling period this simple problem with its intuitively appealing solution is a crucial building block of stochastic inventory theory which comprises a vast literature focusing on operational efficiency typically in this literature market parameters such as demand and selling price are exogenous however incorporating these factors into the mode l can provide an excellent vehicle for examining how operational problems interact with marketing issues to influence decision making at the firm level in this paper we examine an extension of the newsvendor problem in which stocking quantity and selling price are set simultaneously we provide a comprehensive review that synthesizes existing results for the single period problem and develop additional results to enrich the existing knowledge base we also review and develop insight into a dynamic inventory extension of this problem and motivate the applicability of such models

the effect of exit on entry deterrence strategies abstract recent analyses of entry deterrence strategies have required an incumbent s post entry output or pricing strategy to be profit maximizing however most papers have continued to assume that either an incumbent can commit not to exit after entry or that exit is never optimal when there are avoidable fixed costs of operating in any period however exit can be the optimal strategy in this situation entry deterrence strategies operate very differently than when exit is never optimal in fact the possibility of exit can make some previously effective strategies completely ineffective while improving the effectiveness of others

common trends and common cycles the existence of a serial correlation common feature among the first differences of a set of i 1 variables implies the existence of a common cycle in the beveridge nelson stock watson decomposition of those variables a test for the existence of common cycles among cointegrated variables is developed the test is used to examine the validity of the common trend common cycle structure implied by flavin s excess sensitivity hypothesis and campbell and mankiw s mixture of rational expectations and rule of thumb hypothesis for consumption and income linear independence between the cointegration and the cofeature vectors is exploited to decompose consumption and income into their trend and cycle components copyright 1993 by john wiley sons ltd

seasonality in dynamic regression models this paper examines the implications of treating seasonality as an unobserved component which changes slowly over time this approach simplifies the specification of dynamic relationships by separating non seasonal from seasonal factors we illustrate this approach using the consumption model of davidson et al 1978 and estimate a stable error correction model between consumption income and prices over the period 1958 92 more generally we argue that autoregressive models are unlikely to successfully model slowly changing seasonality and may confound seasonal effects with the dynamic responses of prime interest our approach can be used in a wide range of cases and we show that there is little loss in efficiency even if seasonality is deterministic

nonparametric estimation of the effects of advertising the case of lydia pinkham this article reexamines some of the issues raised subsequent to the classical research by palda 1964 we use a nonparametric estimation method that allows us to incorporate both seasonal and smoothness constraints to estimate the parameters of a demand function using monthly data on lydia pinkham s vegetable compound the analysis indicates that the parameters of the estimated demand equation are not constant throughout the long period of the data which covers the whole life cycle of the product

the econometrics of the general equilibrium approach to business cycles early in this century american institutionists and members of the german historical school attacked and rightfully so neoclassical economic theory for not being quantitative this deficiency bothered ragnar frisch and motivated him along with irving fisher joseph schumpeter and others to organize the econometric society in 1930 the aim of the society was to foster the development of quantitative economic theory that is the development of what frisch labeled econometrics soon after its inception the society started the journal econometrica frisch was the journal s first editor and served in this capacity for twenty five years

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

demand estimation in the presence of stochastic trend and seasonality the case of meat demand in the united kingdom if budget shares have stochastic trend or seasonality or both then demand equations based on the assumption of deterministic trend and deterministic seasonality will be mis specified we test this proposition by estimating a linearized almost ideal lai demand system for meat demand in the united kingdom using harvey s structural time series methodology we demonstrate that the model specification allowing for stochastic trend and deterministic seasonality performs best in terms of diagnostic tests and goodness of fit measures it is also shown that the model with stochastic trend is better at out of sample forecasting

an asymmetric error correction model of uk consumer spending this paper augments the granger and lee journal of applied econometrics 4 1989 non symmetric error equilibrium correction model to assess the possibility that in the aggregate consumers respond differently to different types of disequilibrium error this idea is illustrated using an engle granger implementation of the davidson hendry srba and yeo dhsy economic journal 80 1978 model the disequilibrium error is endogenously determined by the long run empirical model and a binary dummy variable captures two alternative states above and below equilibrium spending interaction of the dummy variable with key variables in a short run dynamic model of uk consumer spending augments the dynamics of the dhsy model income elasticities inflation elasticities and speeds of adjustment are all seen to change significantly depending on whether the disequilibrium error is positive or negative and is suggestive of asymmetric behaviour on the part of consumers moreover the asymmetrically augmented mode

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

a neoclassical model of seasonal fluctuations abstract we develop a neoclassical capital accumulation model with seasonal perturbations to tastes and technology we calibrate the model and use it to study the impact of seasonal demand and supply perturbations on economic activity we find that the impact is largely limited to a single quarter we also use our model to isolate the seasonal movements in u s quarterly data and then compute the seasonal variations in tastes and technology that approximately explain these movements we find comovements in productivity and taste perturbations that are very similar to the seasonal comovements of aggregate variables

the demand for m1 in the united states a reply to james m boughton using general to simple methods j m boughton 1993 develops an econometric model that fits almost as well as y baba d f hendry and r m starr bhs 1992 but differs in economic implications and dynamic adjustments he claims the new model is constant is not encompassed by bhs but does not encompass bhs he concludes that the new variables in bhs do not matter for fit or constancy the authors replicate boughton s findings but their simplification encompassing test confirms the importance of the novel variables in bhs and shows that bhs encompasses his model an explanation is offered for its constancy when previous studies suffered predictive failure

modelling the trend and seasonality in the consumption of alcoholic beverages in the united kingdom a univariate time series analysis of the consumption of beer wine and spirits in the uk over the period 1964 1995 is presented the analysis shows that the consumption of beer and wine exhibits stochastic seasonality while the consumption of spirits exhibits deterministic seasonality moreover the three series are found to have stochastic trends analysis of the out of sample forecasting power of the various models reveals that the model with stochastic trend and seasonality is superior to other models the results cast doubt on the validity and soundness of the practice of modelling the consumption of alcoholic beverages by assuming deterministic trend and seasonality

reinterpreting the dhsy 1978 consumption function with hindsight the justification for davidson hendry srba and yeo s dhsy s selection of their favoured equation is shown to be based upon contradicting assumptions about inflation the empirically supported model is argued not to have a theoretically justified error correction interpretation the exclusion of the intercept biases the error correction term such that it becomes significant and negative but undermines the theoretical plausibility of the long run target more generally the statistical need to include an intercept in any regression to avoid parameter bias is demonstrated the rise in inflation in the 1970s is not considered to be a credible explanation of the fall in the average propensity to consume apc from the 1950s and is shown to have questionable empirical support when a below unit income elasticity is allowed for the recent articles which have found support for dhsy s favoured formulation augmented by time varying parameters using the most contemporary uk data should be viewed with caution new interpretations for the dhsy model s persistent success are called for if it is not to be considered that dubious regressions have been resurrected

modelling residential electricity demand in the gcc countries abstract this paper aims at understanding the drivers of residential electricity demand in the gulf cooperation council countries by applying the structural time series model in addition to the economic variables of gdp and real electricity prices the model accounts for population weather and a stochastic underlying energy demand trend as a proxy for efficiency and human behaviour the resulting income and price elasticities are informative for policy makers given the paucity of previous estimates for a region with particular political structures and economies subject to large shocks in particular the estimates allow for a sound assessment of the impact of energy related policies suggesting that if policy makers in the region wish to curtail future residential electricity consumption they would need to improve the efficiency of appliances and increase energy using awareness of consumers possibly by education and marketing campaigns moreover even if prices were raised the impact on curbing residential electricity growth in the region is likely to be very small given the low estimated price elasticities unless that is prices were raised so high that expenditure on electricity becomes such a large proportion of income that the price elasticities increase in absolute terms

seasonal fluctuations and the demand for money the reaction of money holders to the systematic seasonal changes in the level of transactions represents an interesting experiment for learning about the money demand function an analysis of the seasonal fluctuations of the real quantity of money and several measures of transactions in the united states germany the united kingdom and canada reveals the following first consumption expenditures in semidurables nondurables and services appears to be a good proxy for transactions in a money demand function and superior to gross domestic product or consumption expenditures second the transactions elasticity of the demand for money is substantially lower than one

the econometrics of macroeconomic forecasting when an econometric model coincides with the mechanism generating the data in an unchanging world the theory of economic forecasting is reasonably well developed however less is known about forecasting when model and mechanism differ in a non stationary and changing world the paper addresses the basic concepts the invariance of forecast accuracy measures to isomorphic model representations the roles of causal information parsimony and collinearity a reformulated taxonomy of forecast errors differencing and intercept corrections to robustify forecasts against biases due to shifts in deterministic factors the removal of structural breaks by co breaking and forecasting using leading indicators

pricing and lead time decisions in decentralized supply chains this paper studies a decentralized supply chain consisting of a supplier and a retailer facing price and lead time sensitive demands a stackelberg game is constructed to analyze the price and lead time decisions by the supplier as the leader and the retailer as the follower the equilibrium strategies of the two players are obtained using the performance of the corresponding centralized system as a benchmark we show that decentralized decisions in general are inefficient and lead to inferior performance due to the double marginalization effect however further analysis shows that the decision inefficiency is strongly influenced by market and operational factors and if the operational factors are dominating it may not be significant this shows that before pursuing a coordination strategy with retailers a supplier should first improve his or her own internal operations

oligopolistic entry deterrence under incomplete information recent work has investigated the effects of asymmetric information between an incumbent firm and a potential entrant this study extends the analysis to allow the initial market structure to be a noncooperative oligopoly we show that there is a bayesian nash equilibrium in which the incumbent firms although unable to collude strategically deter entry that would have occurred under complete information in contrast to the past limit pricing literature it is a high price that deters entry as it signals to the potential entrant that this is a high cost industry extending the model to allow for multiple potential entrants we find that increasing the degree of potential competition raises the preentry price and reduces the likelihood of entry

the price of owning a car an analysis of auction quota premium in singapore faced with dilemmas parallel to countries besieged by road congestions and limited land resources singapore has chosen to adapt a vehicle quota system vqs whereby car owners are required to bid for a licence in an auction before their vehicles are allowed onto the road in this study the behaviour of vqs auction prices is examined using a structural time series approach for outliers that are not observable from innovations auxiliary residuals with dummy variables are used to supplement the analysis in general prices exhibit a fairly constant seasonal pattern the inclusion of monthly vqs quotas released by the transport regulatory body and the national stock market index is not useful in explaining the observed price behaviour interestingly a basic structural model with stochastic components seems to fit the data best

applied econometrics without sinning one must offer a cautious welcome to any paper kennedy 2001 discussing the problems confronting the implementation of econometrics to empirical data especially from someone who has written an elementary econometrics textbook see kennedy 1985 and later editions there is a considerable gulf between the elementary and inappropriate methodology inherent in many such textbooks and what applied econometricians need to do in practice to model economic data there is some good advice in his paper but also some which is bad kennedy fails to formalize the issues is unclear at key points and neither draws essential distinctions nor defines central terms consequently although some of his recommendations should help to narrow the theory applications gap others could exacerbate the difficulties the remainder of this note amplifies these comments first the topic is in fact addressed in some textbooks albeit none of which are cited by kennedy see inter alia hendry and doornik 2001 and earlier editions especially chs 11 and 15 hendry 1995a provides extensive analyses of the problems of matching theory and evidence empirical modelling and data measurement issues as well as de emphasizing estimation and highlighting the role of graphs spanos 1986 analyzes the difficulties inherent in the conventional paradigm and clearly explains an alternative approach now exposited in his introductory textbook spanos 1999 and charemza and deadman 1997 describe the practice of modelling non stationary time series also see hendry and wallis 1984 ch 1 for an earlier general discussion there are too many relevant papers on methodology to list additional to those kennedy mentions but mizon 1995 and hendry 1997 clarify some of his difficulties second the theory and practice of model building has advanced spectacularly in the last few years see e g hoover and perez 1999 2000 krolzig and hendry 2001 hendry and krolzig 2001b many of the so called sins turn out to be false accusations while others formulating and checking the ingredients of the basic specification remain essential if anything useful is to result from empirical modelling thus considerable revision of the ten econometric commandments

integrating operations and marketing decisions using delayed differentiation of products and guaranteed delivery time under stochastic demand abstract in this research we integrate the issues related to operations and marketing strategy of firms characterized by large product variety short lead times and demand variability in an assemble to order environment the operations decisions are the inventory level of components and semi finished goods and configuration of semi finished goods the marketing decisions are the products price and a lead time guarantee which is uniform for all products we develop an integrated mathematical model that captures trade offs related to inventory of semi finished goods inventory of components outsourcing costs and customer demand based on guaranteed lead time and price the mathematical model is a two stage stochastic integer and non linear programming problem in the first stage prior to demand realization the operation and marketing decisions are determined in the second stage inventory is allocated to meet the demand the objective is to maximize the expected profit per unit time the computational results on the test problems provide managerial insights for firms faced with the conflicting needs of offering i low prices ii guaranteed and short lead time and iii a large product variety by leveraging operations decisions we also develop a solution procedure to solve large instances of the problem based on an accelerated version of the generalized benders decomposition gbd method the accelerating mechanism involves search intensification and diversification around solutions which improve the upper bound the suggested gbd method gives a better solution and a tighter lower bound in a given time period than the conventional gbd implementation and the non linear branch and bound method

pricing to market in a small open economy the determinants of norwegian import prices of manufactures are investigated over the period 1970 1 1991 4 multivariate cointegration analysis establishes a long run relationship between import prices foreign prices the exchange rate and domestic unit labour costs normalized on import prices the long run elasticities are 0 63 foreign prices and the exchange rate and 0 37 domestic costs deviations from this relationship are highly significant in a structural import price equation which also contains positive effects of growth in domestic demand and inflation as well as a negative effect from the norwegian unemployment rate the estimated parameters appear reasonably stable within the sample

recent advances in modelling seasonality abstract in this paper we review recent developments in econometric modelling of economic time series with seasonality the prime focus is on econometric models which incorporate explicit descriptions of seasonal variation instead of removing this variation using a seasonal adjustment method this review centres around developments in seasonal unit root models and in periodic parameter models both in the univariate and multivariate context several empirical examples are used for illustration we also discuss several areas for further research

seasonality stock returns and the macroeconomy this paper examines the relationship between seasonality stock returns and the macroeconomy using a multifactor model of stocks returns observed seasonal patterns in excess returns are found to be a result of seasonality in excess expected returns by utilising a multifactor model of stock returns these higher returns are found to be a compensation for risk associated with a number of macroeconomic factors at certain times of the year

predation reputation and entry deterrence abstract economists often argue that predatory practices are irrational since there exist cheaper or more certain means to gain or maintain a monopoly our gametheoretic equilibrium analysis suggests that if a firm is threatened by several potential entrants then predation may be rational against early entrants even if it is costly when viewed in isolation because it yields a reputation which deters other entrants asymmetric information plays a crucial role in our analysis since it provides the rationale for entrants to base their expectations of the firm s future behavior on its past actions the analysis also suggests methods to treat general reputational phenomena

pricing strategy quality signaling and entry deterrence abstract i investigate a pricing strategy that is aimed at deterring entry by applying a two period model of a durable goods monopolist there exists an incumbent that is of two types that is high and low quality types they differ in terms of their r d capabilities and the incumbent s type is assumed to be unknown to an entrant if the entrant decided to enter the market nash bertrand price competition ensues between the incumbent and the entrant i show that not only limit pricing but also prestige pricing signals the incumbent s quality type which serves to discourage entry in the prestige pricing the high quality type sells the products at an intentionally higher price i also show that although limit pricing is more desirable than prestige pricing from a social welfare viewpoint the incumbent can still choose prestige pricing

modelling and forecasting turkish residential electricity demand abstract this research investigates the relationship between turkish residential electricity consumption household total final consumption expenditure and residential electricity prices by applying the structural time series model to annual data over the period from 1960 to 2008 household total final consumption expenditure real energy prices and an underlying energy demand trend are found to be important drivers of turkish residential electricity demand with the estimated short run and the long run total final consumption expenditure elasticities being 0 38 and 1 57 respectively and the estimated short run and long run price elasticities being 0 09 and 0 38 respectively moreover the estimated underlying energy demand trend which as far as is known has not been investigated before for the turkish residential sector should be of some benefit to turkish decision makers in terms of energy planning it provides information about the impact of past policies the influence of technical progress the impacts of changes in consumer behaviour and the effects of changes in economic structure furthermore based on the estimated equation and different forecast assumptions it is predicted that turkish residential electricity demand will be somewhere between 48 and 80 twh by 2020 compared to 40 twh in 2008

underlying trends and seasonality in uk energy demand a sectoral analysis this paper demonstrates the importance for energy demand modelling of allowing for trends and seasonal effects that are stochastic in form inherent underlying trends may be non linear and reflect not only technical progress which usually produces greater energy efficiency but also other factors such as changes in consumer tastes and the economic structure that may be working in the opposite direction using quarterly unadjusted data for various sectors in the uk it is shown that unless energy demand models are formulated so as to allow for stochastic trends and seasonals estimates of price and income elasticities could be seriously biased

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

spurious deterministic seasonality it is sometimes assumed that the r2 of a regression of a first order differenced time series on seasonal dummy variables reflects the amount of seasonal fluctuations that can be explained by deterministic variation in the series in this paper we show that neglecting the presence of seasonal unit roots may yield spuriously high values of this coefficient

on the periodic structure of the business cycle this article tests whether an economic recovery is equally likely to occur in any month of the year i test this hypothesis with a homogeneous markov switching regime model and use the turning point dates for business cycles marked by the national bureau of economic research and romer i tend to find unequal probabilities to switch from recession to expansions in particular the spring and the month of december appear to have higher incidence of economic recovery my results also imply that recessions and expansions are on average longer or shorter depending on what time of the year they start this suggests the presence of a seasonal pattern in business cycle durations though such a notion of seasonality is quite different from the common one based on unobserved component linear time series models i investigate issues that go beyond linear dependence between seasonality and business cycles

periodic cointegration representation and inference textabstractthis paper considers a new approach to the analysis of stable relationships between nonstationary seasonal time series the basis of this approach is an error correction model in which both long run effects and adjustment parameters are allowed to vary per season first we discuss theoretical arguments for such a periodic error correction model we define periodic cointegration and compare this to the concept of seasonal cointegration next we analyze statistical inference in the periodic error correction model a sequential procedure is proposed consisting of a test for periodic cointegration an estimator of the cointegration parameters and adjustment coefficients and a class of tests for the hypothesis that some of the parameters are constant over the seasons the finite sample behavior of the proposed test statistics is analyzed in a limited monte carlo exercise we conclude the paper with an application to a model of aggregate swedish consumption

forecasting aggregate consumers expenditure in the u k using the dhsy model the performance of the dhsy model in predicting the growth of aggregate consumers expenditure in the uk over the period 1985 1988 is examined the model is applied to four different combinations of consumption variable and data type results show in all cases the predictive performance of the dhsy model to be poor however applied to seasonally adjusted data an improvement can be achieved by allowing for systematic variation in coefficients in particular a variable coefficient dhsy model displays no tendency to underpredict the growth of total consumers expenditure and accurately captures the volatility of non durable expenditure

asymmetry in okun s law in this paper we support the proposition that the output unemployment relationship as represented by okun s law is asymmetric okun s coefficients are defined based on a dynamic model that allows for asymmetry in the relationship between cyclical output and unemployment using data from the united states for the post war period our results show that the short run effects of positive cyclical output on cyclical unemployment are quantitatively different from those of negative ones and the data are consistent with the proposition that cyclical unemployment is more sensitive to negative than to positive cyclical output several theoretical

signalling strength limit pricing and predatory pricing this article merges two areas of strategic pricing theory a dynamic signalling game with two sided uncertainty is presented in which an incumbent is confronted with potential entry and chooses between limit pricing and predatory pricing as a means of achieving or maintaining monopoly profit initial distributions across player types are pivotal to this decision results show that when the incumbent is likely to be strong relative to the entrant predatory pricing is chosen when the incumbent is likely to be weak relative to the entrant limit pricing is chosen for intermediate cases a strong incumbent may choose a combination of these two signalling strategies

industrial electricity demand for turkey a structural time series analysis abstract this research investigates the relationship between turkish industrial electricity consumption industrial value added and electricity prices in order to forecast future turkish industrial electricity demand to achieve this an industrial electricity demand function for turkey is estimated by applying the structural time series technique to annual data over the period 1960 to 2008 in addition to identifying the size and significance of the price and industrial value added output elasticities this technique also uncovers the electricity underlying energy demand trend uedt for the turkish industrial sector and is as far as is known the first attempt to do this the results suggest that output and real electricity prices and a uedt all have an important role to play in driving turkish industrial electricity demand consequently they should all be incorporated when modelling turkish industrial electricity demand and the estimated uedt should arguably be considered in future energy policy decisions concerning the turkish electricity industry the output and price elasticities are estimated to be 0 15 and 0 16 respectively with an increasing but at a decreasing rate uedt and based on the estimated equation and different forecast assumptions it is predicted that turkish industrial electricity demand will be somewhere between 97 and 148 twh by 2020

seasonality in surveys a comparison of belgian french and german business tests abstract seasonal effects appear in qualitative responses of monthly business surveys the seasonal effects can be extracted like in regression or time series models via dummy variables in surveys however there is another route to extract the seasonal effects by incorporating questions on the questionnaires which force respondents to make a distinction between seasonal and cyclical effects it is shown in the paper that a comparison of these two approaches on theoretical grounds is inconclusive evidence from belgian french and german surveys is used to make a comparison the approach with survey based seasonal measures is found more desirable moreover the responses to the request to separate seasonal from cyclical effects seem to be fairly consistent

seasonal cointegration in macroeconomic systems case studies for small and large european countries abstract six variable vector autoregressive systems consisting of macroeconomic series are investigated parallel data series for four european countries are used austria germany federal republic finland and the united kingdom all data series are not seasonally adjusted the aim of the paper is to show that most of the series are better modeled using stochastic seasonality and seasonal unit roots models than simple deterministic models of seasonal structures as a second step seasonal cointegration in the systems is studied it is shown that all four economies display seasonal cointegration as well as usual cointegration

the duhem quine thesis lakatos and the appraisal of theories in macroeconomics the point of this paper is to outline the implications of the duhem quine thesis for the task of appraising theories in economics the duhem quine thesis dqfrom now on states that it is not possible to falsify single hypotheses because it is invariably conjunctions of hypotheses which are being tested thus if a particular hypothesis is found to be in conflict with some piece of empirical evidence all that we can say is that the conjunction of the particular hypothesis with a set of auxiliary hypotheses is false we can never be sure that it is not one or more of the auxiliary hypotheses which is responsible for the anomalous empirical evidence rather than the particular hypothesis in which we are most interested expressed in symbols this means that arguments of the form ho 0 0 ho are not justified where ho is a particular hypothesis o is the observational evidence and the symbols and mean imply conjoined with and not instead our arguments can only justifiably be phrased in the form g1 0 0 g1 where g1 is a conjunction of hypotheses which contains ho there could well be some different conjunction of hypotheses gn which contains ho which is consistent with the empirical evidence the contention of this paper is that many of the debates in macroeconomics have been misguided in that the jointness of hypothesis testing has been ignored by participants in the debates instead the focus of attention has been on the appraisal of single target hypotheses considered in isolation from supportive auxiliary hypotheses the implicit assumption being that it is possible to falsify single target hypotheses the latter assumption is wrong following the logic of the dq thesis we are obliged to conduct our appraisal at the level of groupings of hypotheses that is to appraise any target hypothesis in conjunction with its supportive auxiliary hypotheses the implications of this line of reasoning are perhaps best unravelled in the context of concrete examples from debates in macroeconomics over the last two decades before moving to this task we will in section i provide a brief outline of the history of the dq thesis section ii will then illustrate the misguidedness of appraising target hypotheses in isolation from their supportive auxiliary hypotheses with reference to the often heated and continuing debate regarding the stability of the demand for money function the question of how to appraise groupings of hypotheses is considered in section iii here we will centre the

why do countries and industries with large seasonal cycles also have large business cycles we show that there is a strong positive correlation across countries and industries between the standard deviation of the seasonal component and the standard deviation of the nonseasonal component of aggregate variables after documenting this stylized fact we discuss possible explanations and develop a model that generates our empirical finding the main feature of the model is that firms endogenously choose their degree of technological flexibility as a function of the amounts of seasonal and nonseasonal variation in demand although this model is intended to be illustrative we find evidence supporting one of its key empirical implications

econometrics and business cycle empirics business cycle empirics have long been a central arena for the debate about the roles of economic theory and econometrics in modelling economic time series data some famous historical examples are moore i9i4 keynes i939 and koopmans i947 sources for potential disagreements include that the entire economic system is involved and unobservable stochastic forces seem more than usually prominent in determining the outcome not only do these constitute two aspects about which it is hard to theorise they are equally difficult to model empirically there are both positive arguments for and negative arguments against according a dominant role to either theory or evidence not least because it is unclear what constitutes admissible instances of either in the absence of the other we first review what precludes a purely theoretical approach what prevents a purely empirical approach and hence why an interactive approach is imperative even so both the relative importance of the two ingredients and their substantive contents are likely to remain at issue first concerning the economy considerable empirical evidence suggests that it is a dynamic non linear high dimensional and evolving entity so studying it is difficult society and social systems alter over time laws change and technological innovations occur so establishing any invariants of an economic system is not easy such difficulties adversely afflict both theory and empirical modelling secondly concerning the observations time series data in economics are heterogeneous non stationary time dependent and interdependent so it is difficult to acquire knowledge from the available empirical information again such factors also make it hard to theorise about the properties of the underlying system a more direct critique of the empirical enterprise is that samples are short and highly aggregated economic magnitudes are inaccurately measured are subject to considerable revision and important variables are not measured or are unobservable so inferences are both imprecise and tentative combined with the simultaneity non constancy and high dimensionality of economic data a purely empirical approach seems to many to be precluded other criticisms of econometric approaches include worries about data mining pretest biases a lack of genuine identifiability and collinearity sometimes combined with a belief that theory can compensate an overemphasis on a

the uk consumption function and structural instability improving forecasting performance using a time varying parameter approach previous studies indicate that the poor forecasting performance of constant parameter uk consumption expenditure models is caused by structural instability in the underlying data generating process typically this instability is removed by reparameterization within the constant parameter framework an alternative modelling strategy is to allow some or all of the parameters to vary over time a uk non durable consumption expenditure model with time varying parameters is developed based on the permanent income hypothesis of friedman 1957 this model takes into account temporal changes in the average and marginal propensities to consume the variation in the parameter estimates is given an economic interpretation in terms of the influence of omitted variables namely uk financial liberalization and expectational changes the forecasting performance of this model is superior to that of two widely used constant parameter models further tests show that even if these constant parameter models are respeci

who did worse a comparison of us and british non white unemployment 1970 1998 us and british unemployment rates for non white males and females are compared over the period 1970 1998 whereas us rates remained fairly steady there was a marked increase in british non white unemployment rates the reasons for this poor performance relative to the good performance of us non whites are explored it is shown that non white unemployment behaves in di erent ways across the two countries for example british rates rise faster in a recession than white rates whereas us rates appear not to follow this british hypercyclical pattern

interpreting long run equilibrium solutions in conventional macro models a comment c m kelly 1985 claims that long run solutions from econometric models may be seriously misleading when expectations variables are erroneou sly replaced by observed outcomes it is shown that his results deriv e uniquely from an invalid exogeneity assumption all inferences are therefore potentially invalid illustrated by a case where the long r un is correct while the short run is biased using an encompassing fr amework error variance rankings and related tests distinguishing exp ectational from conditional models are derived for stationary cases for nonstationary integrated series the long run will be correctly e stimated when the data are cointegrated whereas the short run remain s biased copyright 1988 by royal economic society

changes in seasonal patterns are they cyclical this paper explores the hypothesis that the seasonal patterns of macroeconomic variables vary with expansions and contractions graphical techniques and generalized predictive tests for structural stability are used to identify and test patterns of changing seasonality a monte carlo exercise shows the power of the tests against interesting alternatives the empirical results suggest that seasonal patterns are unstable and that in many cases changes are linked to the stages of the business cycle the forecasting costs incurred by treating seasonality as constant are discussed and evaluated

price delivery time guarantees and capacity selection this paper studies the impact of using delivery time guarantees as a competitive strategy in service industries where demands are sensitive to both price and delivery time we assume that delivery reliability is crucial and investment in capacity expansion is plausible in order to maintain a high probability of delivering the time guarantee a mathematical framework is proposed to understand the interrelations among pricing delivery time guarantee and capacity expansion decisions specifically an optimization model is developed to determine the joint optimal selection of these three important decision variables with an objective of maximizing the average net profit we characterize the optimal decisions and study their qualitative behaviors as various parameters change we further present a numerical example to illustrate how the results of our model can be used to provide useful managerial insights for selecting the best competing strategies for firms with different operating characteristics our model and results are also applicable to a make to order manufacturing environment

advertising and limit pricing we enrich milgrom and roberts 1982 limit pricing model to allow an incumbent to signal his costs with both price and advertisements our fundamental result is that a cost reducing distortion occurs in that the incumbent behaves as if there were complete information but his costs were lower than they are preentry price is therefore distorted downward and demand enhancing advertising is distorted upward as a consequence of signalling if advertising is a purely dissipative signal it is not used nor therefore distorted recent refinements of the sequential equilibrium concept are featured

a seasonal model of consumption in this paper the authors present strong empirical evidence that the long run income elasticity of u k nondurable consumers expenditure and its short run rate of adjustment both vary across seasons such variability in the behavior of consumers is consistent with the hypotheses that consumers have seasonal preferences and that they exhibit seasonally varying degrees of habit persistence the tests are based on a modified form of the error correction methodology that allows for seasonally varying slope coefficients simulations for the dynamic responses of the authors model illustrate the important policy implications of these results coauthors are r c bladen hovell a p l chui denise r osborn and j p smith copyright 1989 by royal economic society