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Temporary and Permanent Changes in Consumption Growth

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  • Berloffa, Gabriella

Abstract

This paper examines whether demographic variables and other household characteristics are more likely to affect the intercept of the Euler equation or the intertemporal elasticity of substitution of the household. Analysis of British data suggests that demographics affect the growth rate of consumption in a purely transitory way, while the educational level and the employment status of the wife appear to have a significant effect on the intertemporal elasticity of substitution. The effect of the employment status of the head is more uncertain. After taking these differences into account, the hypothesis of no excess sensitivity cannot be rejected for households with two earners. Copyright 1997 by Royal Economic Society.

Suggested Citation

  • Berloffa, Gabriella, 1997. "Temporary and Permanent Changes in Consumption Growth," Economic Journal, Royal Economic Society, vol. 107(441), pages 345-358, March.
  • Handle: RePEc:ecj:econjl:v:107:y:1997:i:441:p:345-58
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    Cited by:

    1. Tomas Havranek & Anna Sokolova, 2016. "Do Consumers Really Follow a Rule of Thumb? Three Thousand Estimates from 130 Studies Say "Probably Not"," Working Papers 2016/08, Czech National Bank, Research Department.
    2. Barry P. Bosworth & Ralph C. Bryant & Gary Burtless, 2004. "The Impact of Aging on Financial Markets and the Economy: A Survey," Working Papers, Center for Retirement Research at Boston College 2004-23, Center for Retirement Research.
    3. Taylor, Alan M, 2001. "Potential Pitfalls for the Purchasing-Power-Parity Puzzle? Sampling and Specification Biases in Mean-Reversion Tests of the Law of One Price," Econometrica, Econometric Society, vol. 69(2), pages 473-498, March.
    4. Fuad Hasanov, 2005. "Housing, Household Portfolio, and Intertemporal Elasticity of Substitution: Evidence from the Consumer Expenditure Survey," Macroeconomics 0510011, University Library of Munich, Germany.

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