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Endogeneity in Error Correction-Almost Ideal Demand System Estimation of Cereals in Cameroon

G. N. Tiwang, P. Ningaye

Abstract



The objective of this paper is to account for endogeneity in dynamic food demand system using error correction technique with time series data specification. The methodology of study is Error Correction Almost Ideal Demand System with Iterated Linear Least Square (ECM-AIDSILLS) to Cameroon data on cereals from FAO and World Bank databases. Results show that the proposed formulation performs well theoretically and empirically. The ECM-AIDSILLS presents budget shares, income and price elasticities different from those obtained without considering endogeneity problem in Error Correction Almost Ideal Demand System(ECM-AIDS) and also with very large error terms, showing difficulties to compare alike samples using ECM-AIDSILLS. The study recommend that dynamic evaluation of food demand system should always verify endogeneity problems after stationarity since its omission leads to fallacious results and inappropriate policy.

Keywords


ECM-AIDSILLS, endogeneity, time series, food demand system, Cameroonn

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