Problems of Estimating the Linear Expenditure System and its Related Forms

This note estimates the Linear Expenditure System (LES), the Extended Linear Expenditure System (ELES), and the Extended Linear Expenditure System with Durables (DELES), under two alternative error specifications using seasonally adjusted quarterly Australian data for 1959Q4-1976Q2. The purpose is to gauge the contribution of DELES to the family of linear expenditure systems. Numerical identification of the subjective time-preference and market interest rate parameters turn out to be the most important in determining the limiting properties of the model and appraising it.