Forward Looking Behavior And Empirical Household Consumption Function
AbstractModern consumer theories are built upon the premise of the forward looking behavior of households. While most of the empirical studies at micro level are based on Euler equation, there have been few to estimate the household consumption function and test the implication of forward looking behavior directly. One of the main difficulties is that forward looking behavior involves such variables as human wealth and income uncertainty which are not directly observable. This paper exploits the rotating panel feature of Consumer Expenditure Survey to construct the proxies and test significance of them in the household consumption function. We fail to find evidence to support forward looking behavior over long horizon.
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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse7_2001.
Date of creation: Jan 2001
Date of revision:
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Consumption Function; Uncertainty; Human Wealth;
Find related papers by JEL classification:
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-04-21 (All new papers)
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