U.S DEMAND FOR EDIBLE FATS AND OILS: A DYNAMIC SYSTEM WITH ARMA ERRORS
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This study investigates the effects ofprices and total expenditure on U.S. household con umption of edible fats and oils that are strictly used f or salad and cooking. A flexible dynamic demand system which nests the Tran.slog and Almost Ideal Demand Systems is estimated using annual time-series datd in the U.S. Results suggest that correction for serial correlation is important. With dynamic specification and correction for serial correlation. the generalized model outperforms the two restrictive specifications in terms ofsimple model adequacy but generates similar demand elasticities. Demands f or f ats and oils are f ound to be price inelastic. We also find a mix ofgross substitutes and complements among the products considered. Findings on the effects ofprice · ore usefulfor private edible oil companies in formulating their pricing trategies and forpolicy makers in designil?g effective domestic and trade policies.
Abstract
This study investigates the effects ofprices and total expenditure on U.S. household con umption of edible fats and oils that are strictly used f or salad and cooking. A flexible dynamic demand system which nests the Tran.slog and Almost Ideal Demand Systems is estimated using annual time-series datd in the U.S. Results suggest that correction for serial correlation is important. With dynamic specification and correction for serial correlation. the generalized model outperforms the two restrictive specifications in terms ofsimple model adequacy but generates similar demand elasticities. Demands f or f ats and oils are f ound to be price inelastic. We also find a mix ofgross substitutes and complements among the products considered. Findings on the effects ofprice · ore usefulfor private edible oil companies in formulating their pricing trategies and forpolicy makers in designil?g effective domestic and trade policies.