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Multicointegration in US Consumption Data

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  • Boriss Siliverstovs

Abstract

The present paper tests for the existence of multicointegration between real per capita private consumption expenditure and real per capita disposable personal income in the USA. In doing so, we exploit the fact that the flows of disposable income and consumption expenditure on the one hand, and the stock of consumers' wealth, which can be considered as cumulative past discrepancies between the flows of income and expenditure, on the other hand, can be thought of as a stock-flow model, in which multicointegration is likely to occur. We apply recently developed I(2) techniques for testing for multicointegrating relations and find supporting evidence for the existence of multicointegration in US consumption data.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.40953.de/dp382.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 382.

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Length: 31 p.
Date of creation: 2003
Date of revision:
Handle: RePEc:diw:diwwpp:dp382

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Keywords: Cointegration; multicointegration; I(2) processes; consumption;

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  1. Flavin, Marjorie, 1993. "The Excess Smoothness of Consumption: Identification and Interpretation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 60(3), pages 651-66, July.
  2. Clara Jørgensen & Hans Christian Kongsted & Anders Rahbek, 1996. "Trend-Stationarity in the I(2) Cointegration Model," Discussion Papers, University of Copenhagen. Department of Economics 96-12, University of Copenhagen. Department of Economics.
  3. Johansen, S., 1991. "Testing Weak Exogeneity and the Order of Cointegration in UK Money Demand Data," Papers, Helsinki - Department of Economics 78, Helsinki - Department of Economics.
  4. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, Econometric Society, vol. 55(2), pages 251-76, March.
  5. Vahid, F & Engle, Robert F, 1993. "Common Trends and Common Cycles," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 8(4), pages 341-60, Oct.-Dec..
  6. Campbell, John Y, 1987. "Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis," Econometrica, Econometric Society, Econometric Society, vol. 55(6), pages 1249-73, November.
  7. Banerjee, A. & Cockerell, L. & Russell, B., 1998. "An I(2) Analysis of Inflation and the Markup," Economics Series Working Papers, University of Oxford, Department of Economics 99203, University of Oxford, Department of Economics.
  8. Lee, Tae-Hwy, 1996. "Stock Adjustment for Multicointegrated Series," Empirical Economics, Springer, Springer, vol. 21(4), pages 633-39.
  9. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 987-1007, July.
  10. Engsted, Tom & Haldrup, Niels, 1999. " Multicointegration in Stock-Flow Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 61(2), pages 237-54, May.
  11. Godfrey, Leslie G, 1978. "Testing for Higher Order Serial Correlation in Regression Equations When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, Econometric Society, vol. 46(6), pages 1303-10, November.
  12. Johansen, Soren, 2006. "Statistical analysis of hypotheses on the cointegrating relations in the I(2) model," Journal of Econometrics, Elsevier, Elsevier, vol. 132(1), pages 81-115, May.
  13. Niels Haldrup, 1998. "An Econometric Analysis of I(2) Variables," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 12(5), pages 595-650, December.
  14. Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, Elsevier, vol. 60(1-2), pages 203-233.
  15. Paolo Paruolo, 1994. "The role of the drift in I(2) systems," Statistical Methods and Applications, Springer, Springer, vol. 3(1), pages 93-123, February.
  16. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198774501, October.
  17. Granger, C W J & Lee, T H, 1989. "Investigation of Production, Sales and Inventory Relationships Using Multicointegration and Non-symmetric Error Correction Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 4(S), pages S145-59, Supplemen.
  18. Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 88(352), pages 661-92, December.
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Cited by:
  1. Vanessa Berenguer Rico & Josep Lluis Carrion Silvestre, 2006. "Testing for multicointegration in panel data with common factors," Working Papers in Economics, Universitat de Barcelona. Espai de Recerca en Economia 160, Universitat de Barcelona. Espai de Recerca en Economia.
  2. Boriss Siliverstovs & Tom Engsted & Niels Haldrup, 2003. "Long-Run Forecasting in Multicointegrated Systems," Discussion Papers of DIW Berlin 381, DIW Berlin, German Institute for Economic Research.
  3. Scheiblecker, Marcus, 2013. "Between cointegration and multicointegration: Modelling time series dynamics by cumulative error correction models," Economic Modelling, Elsevier, Elsevier, vol. 31(C), pages 511-517.
  4. Hualde, Javier, 2014. "Estimation of long-run parameters in unbalanced cointegration," Journal of Econometrics, Elsevier, Elsevier, vol. 178(2), pages 761-778.

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