DEMAND FOR INTERNATIONAL TELECOMMUNICATION - TIME-VARYING PRICE ELASTICITY

In this empirical study, the price elasticity of the demand for teleco mmunication between Sweden and three destination countries, Germany (F RG), United Kingdom, and USA, was investigated. Within the constant pa rameter framework the structural relations identified to explain the t elecommunication demand are similar for the three countries. The short - and long-term price elasticities of the demand derived from the mode ls are in the range that is reported in other empirical studies. Howev er, recursive estimation and the analysis of recursive residuals suppo rt theoretical assumptions of time variability of price elasticity. Ka lman filtering in various versions, differing in the way of determinin g the hyperparameters, as well as moving local regression analysis are applied to estimate the trajectories of the price elasticity.