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A vector time series model of the formis known as a vector autoregressive model with exogenous variables (VARX model) and involves a regressand vector y ( t) and a regressor vector x ( t). This paper provides a method for the recursive fitting of subset VARX models. It suggests the use of ascending recursions in conjunction with an order selection criterion to choose an 'optimum' subset VARX model.

This paper uses the absolute price version of the differential demand model to examine substitution possibilities for the consumption of beer in different containers in the period 1968–69 to 1983–84. The results indicate that the effect of beer packaging in beer consumption is significant. The same beer in different containers can be treated as quite different products The conditional substitution between bottled beer and canned beer is the highest among the beers. However, due to a strong ‘income effect’, the unconditional substitution between them is lower than that between bottled beer and bulk beer.

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