An Econometric Study of Private Consumption Expenditure in Sweden

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An Econometric Study of Private Consumption Expenditure in Sweden

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Johnsson, Helena (National Institute of Economic Research)
Kaplan, Peter (National Institute of Economic Research)

Abstract

A Consumption function based on the life-cycle hypothesis is estimated using Swedish anuual data for the period 1970-1998. Hendry`s general to specific approach is applied using an error correction model in order to arrive at the preferred equation. In order to confirm the estimated cointegrating relationship, the Johansen procedure is employed. The preferred equation displays a good fit over the sample period and diagnostic tests indicate that the parameters are robust over time. The long run properties and the dynamic response to shocks in the exogenous variable are evaluated using a system of simultaneous equations containing the preferred eauation and a disaggregated form of the savings identity. Results from the simulations are in accordance with intuition and consistent with the life-cycle hypothesis.

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Paper provided by National Institute of Economic Research in its series Working Paper with number 70.

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Length: 42 pages
Date of creation: 01 Dec 1999
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Handle: RePEc:hhs:nierwp:0070

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- Lyhagen, Johan, 2001. "The Effect of Precautionary Saving on Consumption in Sweden," Applied Economics, Taylor and Francis Journals, vol. 33(5), pages 673-81, April. [Downloadable!] (restricted)
Godfrey, Leslie G, 1978. "Testing for Higher Order Serial Correlation in Regression Equations When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1303-10, November. [Downloadable!] (restricted)
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