The objective of this paper is to analyze empirically the demand for cigarettes in Greece during the period 1960-1995. by using a theoretically consistent model, which incorporates the property of linear homogeneity on the estimated demand equation, and it also accounts for the stochastic nature of the variables analyzed. That is, the stationarity property of the variables used are firstly examined. then cointegration between variables is established and finally, an error correction model is set up and estimated for the demand for cigarettes.
From this model, in which health scares and advertising effects are captured
by dummy variables. estimates of short- and long-run price and income impacts on the cigarette consumption are obtained.
The present study is organized as follows. Section 2 discusses the theoretical model. the data a11d the empirical results are presented in Section 3. Finally, concluding remarks are given in Section 4.