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Excess Sensitivity of Consumption Using Micro Data in The UK

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Author Info
YU, Ge

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Abstract

The impact of the subjective variables specific to individual financial well being on economic outcomes is considered whether they are able to predict the growth of household consumption. Subjective variables include more information that is difficult to be identified or valued in previous empirical work compared to real income. The empirical analysis finds that the financial well being variables do predict the household consumption of non-durable goods. Higher financial expectations are correlated with less saving. I also find some of the rejection of the PIH is due to asymmetric preferences and the systematic heterogeneity in forecast errors.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 548.

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Date of creation: 2005
Date of revision: 2006
Handle: RePEc:pra:mprapa:548

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Related research
Keywords: systematic errors; expectations errors; PIH; REPIH; asymmetric preference; excess sensitivity;

Find related papers by JEL classification:
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical

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