Box-Cox Test: the theoretical justification and US-China empirical study

International Journal of Industrial Engineering Computations 01/2011; DOI: 10.5267/j.ijiec.2010.04.003
Source: DOAJ

ABSTRACT In econometrics, the derivation of a theoretical model leads sometimes to two econometric models, which can be considered justified based on their respective approximation approaches. Hence, the decision of choosing one between the two hinges on applied econometric tools. In this paper, the authors develop a theoretical econometrics consumer maximization model to measure the flow of durables’ expenditures where depreciation is added to former classical econometrics model. The proposed model was formulated in both linear and logarithmic forms. Box-Cox tests were used to choose the most appropriate one among them. The proposed model was then applied to the historical data from the U.S. and China for a comparative study and the results discussed.

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