The Consumer Price Equation in the Post War British Economy: An Exercise in Equation Specification Testing

After a general discussion of alternative formulations of the Almon distributed lag (as in Fair and Jaffee (1971), Godfrey and Poskitt (1975), Robinson (1970), Trivedi and Pagan (1976)), particularly the problem of choosing the maximum lag, the paper uses this in discussing a price equation for the British economy. This is based on a normal-costs assumption similar to that used by Godley-Nordhaus (1972), and the paper can be regarded as an attempt to test a specification similar to that of these authors by considering a wide range of alternative specifications.