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Sensitivity of consumption to income and to government purchases: some specification and estimation issues

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  • Dimitris Hatzinikolaou

Abstract

The paper derives a nonlinear error-correction model (ECM) for consumption and shows that existing models that are based on quadratic utility, combine permanent income and current-income consumption, and nest (or could nest) the hypothesis of substitutability between private consumption and government purchases are special cases of the ECM. The importance of some econometric issues that have not received proper attention in the literature is demonstrated by estimating the models using US aggregate quarterly data, 1953:1-1992:4. The evidence suggests that the ECM produces more reliable estimates than do the existing restrictive models.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/000368400322390
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 32 (2000)
Issue (Month): 6 ()
Pages: 767-775

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Handle: RePEc:taf:applec:v:32:y:2000:i:6:p:767-775

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Cited by:
  1. Hatzinikolaou, Dimitris, 2012. "Failure in the market for reviewing economics papers: Good readers, bad referees, and ugly papers," MPRA Paper 45384, University Library of Munich, Germany, revised 26 Sep 2012.

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