Maximum likelihood estimation of a complete system of demand equations

Short- and long-run price and income elasticities are generally unavailable at the regional level for major imported food groups for the Caribbean. These elasticity measures are needed to enhance policymaking. This paper therefore seeks to determine the income, own-price and cross-price elasticities of eight major imported food groups. This will show the relationships between income and price changes on the import quantities for the major food groups. This was done using an error-corrected linear approximate almost ideal demand system (EC-LA-AIDS) for the period 1961–2021, using annual data. The study found that the theoretical restrictions of homogeneity and symmetry did not hold in the static LA-AIDS model but did in the EC-LA-AIDS model. The speed of adjustment parameter in the EC-LA-AIDS model revealed that imported beverages had the slowest adjustment to long-run equilibrium while all other imported food categories had a moderate adjustment speed. The study also derived short- and long-run income and price elasticities of import demand for the eight imported food categories. In both time horizons, income elasticities revealed that all imported food categories were normal goods. In both time horizons, imported meat and seafood, and sugar and honey were the most responsive to changes in income, while spices and tea was the least responsive. Own-price elasticities revealed that all imported food categories were import price inelastic except for meat and seafood which was found to be import price elastic in both time horizons. Additionally, cross-price elasticities unveiled various substitution and complementary relationships between pairs of imported foods. The study not only contributed empirical insights into the import demand dynamics of the Caribbean, but also emphasized significant policy implications arising from the research findings.

Economics in Europe has become more international since the 1970s. To a certain extent, this internationalisation is also an ‘Americanisation’ as many European economists have adopted the standards and approaches of US economics. This prompts an important question: amidst this convergence, are there any fields that have managed to retain a distinctively European character?

In this article, we use topic modelling and bibliometric coupling to identify European specialties between 1969 and 2002. We focus on macroeconomic articles published in the European Economic Review and compare their bibliographic references and textual content to what has been published in the top 5 journals.

Despite economics internationalization since the 1970s, European macroeconomics displayed distinct characteristics across two distinct periods. In the late 1970s and early 1980s, European macroeconomists maintained a certain distance from US debates centred around rational expectations and new classical economics. However, they embraced the concept of microfoundations through the lens of disequilibrium theory, fostering transnational collaborations and offering a unique framework for addressing various macroeconomic issues. Nevertheless, both the prominence of new classical economics in the US and the decline of the disequilibrium approach after the mid-1980s, European macroeconomics shifted towards closer alignment with US approaches. In the 1990s, Political economy, inspired by pioneering US contributions like Kydland and Prescott (1977) and Barro and Gordon (1983a,b), emerged in the 1990s as a new framework offering a common language for many European macroeconomists. However, specific European challenges like high unemployment rates and European integration continued to drive research in distinctive directions.

Currencies must be priced in terms of a numéraire when they are included in a regression model. The numéraire can be either a single-currency numéraire or a multicurrency numéraire: a weighted basket of numéraire currencies. Pricing currencies in terms of a multicurrency numéraire results in a system of multilateral exchange rates. A no-arbitrage condition enforces the movements in the system of multilateral exchange rates associated with the numéraire currencies to be a singular system, where the covariance matrix is singular and its ordinary inverse does not exist. Singular systems pose a methodological challenge in a multivariate regression model. This paper provides a solution to overcome this methodological challenge by imposing implicit restrictions on both the explanatory variables and the regression coefficients. In addition, the generalized least squares estimator is modified by replacing the ordinary inverse with the generalized inverse. The proposed solution provides a consistent multivariate regression model to explain the observed heterogeneity in the relative currency market.

This paper uses neoclassical demand theory to calculate the welfare costs of inflation. It considers the demand interactions between money, consumption goods, and leisure, relaxes the assumption of fixed consumer preferences, and addresses the inter-related problems of estimation of money demand functions, instability of money demand relations, and monetary aggregation. It makes full use of the relevant economic theory and econometrics and generates inference in terms of long-run welfare costs of inflation that is internally consistent with the data and models used.

We investigate interfuel substitution using the Minflex Laurent flexible demand system and a more flexible copula estimation approach. In doing so, we relax the joint normality assumption of the errors of the demand system and estimate the model without having to delete one equation as is usually the practice under the assumption of jointly normally distributed errors. The results indicate that the short-run Morishima elasticities of substitution among crude oil, natural gas, and coal are small, implying that one fuel has hardly utilized to substitute for another fuel.

This paper examines how scale and scope economies in accounting firms changed after Sarbanes-Oxley (SOX) regulations. Korea enacted SOX-type legislation to improve financial reporting quality in 2005. Our sample comprises 301 firm-year observations from 2002 to 2008. The sample period is divided into the pre-SOX (2002–2004) and post-SOX (2006–2008) periods. We estimate a multi-product translog cost function to determine whether significant changes occur in scale and scope economies during the pre- and post-SOX periods. Empirical results suggest that overall and product-specific economies of scale prevailed in accounting firms during the full sample, pre- and post-SOX periods. Accounting firms were less able to exploit scale economies in the post-SOX period. The marginal costs of producing Audit and Accounting (A&A) increased, whereas those producing Tax Services (TAX) declined. Cost complementarities existed only in jointly providing TAX and Business Advisory Services (BAS) during the pre-SOX years. In contrast, scope economies occurred in the joint production of A&A and TAX or TAX and BAS during the post-SOX period. Our analysis can be applied to the accounting industry in other countries that have adopted SOX-type regulations.