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Revisiting the Determinants of Consumption: A Bayesian Model Averaging Approach

Author

Listed:
  • Pinar Deniz

    (Department of Economics, Marmara University, Istanbul 34722, Turkey)

  • Thanasis Stengos

    (Department of Economics, University of Guelph, Guelph, ON N1G 2W1, Canada)

Abstract

This study revisits the widely researched area of the consumption function using Bayesian Model Averaging (BMA) for a panel of EU countries to deal with the uncertainty of potential determinants, using the convergence club analysis to construct homogeneous groups by income. BMA suggests that income is the only variable that is found to be a strong determinant across different country groups, whereas other variables have varying importance for different country groups.

Suggested Citation

  • Pinar Deniz & Thanasis Stengos, 2023. "Revisiting the Determinants of Consumption: A Bayesian Model Averaging Approach," JRFM, MDPI, vol. 16(3), pages 1-13, March.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:3:p:190-:d:1093692
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    References listed on IDEAS

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    5. Milton Friedman, 1957. "The Permanent Income Hypothesis," NBER Chapters, in: A Theory of the Consumption Function, pages 20-37, National Bureau of Economic Research, Inc.
    6. Zeugner, Stefan & Feldkircher, Martin, 2015. "Bayesian Model Averaging Employing Fixed and Flexible Priors: The BMS Package for R," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 68(i04).
    7. Hassan Gholipour Fereidouni & Reza Tajaddini, 2017. "Housing Wealth, Financial Wealth and Consumption Expenditure: The Role of Consumer Confidence," The Journal of Real Estate Finance and Economics, Springer, vol. 54(2), pages 216-236, February.
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