Government Expenditures and the Permanent-Income Model
AbstractThere is a substantial empirical literature which examines the relationship between private and public consumption. The conclusions from this literature, however, are generally mixed. In this paper, we attempt to provide some additional evidence on this relationship. We consider a two-good permanent-income model which allows us to estimate both the intraperiod and intertemporal elasticities of substitution. The estimation strategy proceeds in two steps. In the first step we use cointegration methods to estimate the intraperiod preference parameter, while in the second step we estimate the intertemporal parameter via a generalized method of moments. A useful implication of this approach is that it allows us to use the estimated preference parameters to shed some light on whether private and public consumptions are best described as complements, substitutes, or unrelated occurrences (in a Edgeworth-Pareto sense). (Copyright: Elsevier)
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Bibliographic InfoArticle provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.
Volume (Year): 1 (1998)
Issue (Month): 3 (July)
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Other versions of this item:
- Robert A. Amano & Tony Wirjanto, 1997. "Government Expenditures and the Permanent-Income Model," Working Papers 98002, University of Waterloo, Department of Economics, revised Nov 1997.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
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