Discussion Papers no. 151
Dynamic modelling of domestic prices with time-varying elasticities and rational expectations
The paper analyses the price on domestic market for an aggregate commodity produced by Norwegian private mainland economy. The long-run solution is modelled assuming imperfect competition. The elasticities with respect to unit labour costs and competing prices vary with an indicator for competitive strength in domestic market. I consider two models for the dynamic part of the equation. Model A is a conditional ECM in current and lagged variables. Model B is derived from a multiperiod quadratic loss function which introduces rational expectations to the model. The backward-forward restrictions are not rejected. The estimated elasticities for both models are in line with the previous empirical results for the Norwegian economy. Model A is preferred to Model B, partly on the basis of informal encompassing results.
Om publikasjonen
- Tittel
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Dynamic modelling of domestic prices with time-varying elasticities and rational expectations
- Ansvarlig
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Ingvild Svendsen
- Serie og -nummer
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Discussion Papers no. 151
- Utgiver
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Statistics Norway, Research Department
- Emne
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Discussion Papers
- Antall sider
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45
- Målform
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Engelsk
- Om Discussion Papers
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Discussion papers comprise research papers intended for international journals and books. A preprint of a Discussion Paper may be longer and more elaborate than a standard journal article as it may include intermediate calculations, background material etc.
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