Credit and Habit Modification in the USA: 1959-1997
AbstractSince Brown (1952), habit formation models of consumption have assumed that memory loss is a univariate process. This paper dispenses with this assumption to consider habit modification in consumption. A model is proposed where household credit depletes the habit stock and motivates consumers towards a more forward-looking behaviour. The Johansen (1988) and Gregory and Hansen (1996) procedures are applied to test the hypothesis using U.S. data. Consistent withthe theory, the evidence presented shows that both household and consumer credit cointegrate with consumption expenditure and disposable income. Further, the long-run relationship has been subject to a structural break in 1987.
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 682.
Length: 43 pages
Date of creation: 1999
Date of revision:
Contact details of provider:
Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia
Phone: +61 3 8344 5289
Fax: +61 3 8344 6899
Web page: http://www.economics.unimelb.edu.au
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CONSUMPTION ; CREDIT ; BEHAVIOUR;
Find related papers by JEL classification:
- E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
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