One of the most common features of regional econometric models is the specification of national variables as exogenous to the regional model. Often these variables appear as distributed lags in the structural equations. Concepts and tests for statistical causality can be used to determine whether this procedure is appropriate in a particular case. This paper discusses these tests and illustrates them with an example from a model being developed of the state of Indiana. It is our view that such tests can be a useful step in the specification of a regional econometric model.
This study extends prior consumer mass media expenditures research by proposing two new econometric models for testing the principle of relative constancy (PRC). The PRC posits that the proportion of income devoted to the mass media will not change significantly over time, although some variations among mass media categories may occur to enable new communication technologies to succeed in the marketplace. Regression and cointegration analyses were conducted with Belgian mass media expenditure data from 1953 to 1991. Results revealed that the PRC failed to be supported for both models. Because of the PRC's lack of economic foundation and ambiguous empirical evidence, the authors suggest a shift in emphasis from PRC research to development of alternative mass media expenditure models.
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