Testing alternative dynamic specifications: an application to meat demand in Belgium

Abstract

This letter examines alternative specifications of dynamic adjustment in the context of a linear approximate AIDS model of the demand for meat in Belgium. The model also incorporates demographic variables to account for structural changes in consumer preferences. Using a general first-order ECM specification as a unifying analytical framework, several tests are performed in an attempt to validate the preferred dynamic model specification. The results indicate that the widely-used dynamic model with one adjustment parameter (diagonal adjustment matrix) as well as the autoregressive and static models are strongly rejected by the data. The proposed symmetric specification of dynamic adjustment presents a viable alternative.