Progress from forecast failure -- the Norwegian consumption function
After a forecast failure, a respecification is usually necessary to account for the data "ex post", in which case there is a gain in knowledge as a result of the forecast failure. Using Norwegian consumption as an example, we show that the financial deregulation in the mid-1980s led to forecast failure both for consumption functions (CFs) and Euler equations (EEs). We argue in the paper that such forecast failures would appear to be at odds with an underlying DGP belonging to the class of EEs, a result that also explains why progress took the form of a respecified CF where wealth plays a central role. That model is updated and is shown to have constant parameters despite huge changes in the income to wealth ratio over nine years of new data. Copyright Royal Economic Society 2002
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 5 (2002)
Issue (Month): 1 (June)
|Contact details of provider:|| Postal: 2 Dean Trench Street, Westminster, SW1P 3HE|
Phone: +44 20 3137 6301
Web page: http://www.res.org.uk/
More information through EDIRC
|Order Information:||Web: http://www.ectj.org|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Campbell, John Y, 1987.
"Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis,"
Econometric Society, vol. 55(6), pages 1249-1273, November.
- John Y. Campbell, 1986. "Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis," NBER Working Papers 1805, National Bureau of Economic Research, Inc.
- Jansen, Eilev S. & Teräsvirta, Timo, 1995. "Testing Parameter Constancy and super Exogeneity in Econometric Equations," SSE/EFI Working Paper Series in Economics and Finance 53, Stockholm School of Economics.
- Hendry, David F, 1995. "Econometrics and Business Cycle Empirics," Economic Journal, Royal Economic Society, vol. 105(433), pages 1622-1636, November.
- Berg, Lennart & Bergstrom, Reinhold, 1995. " Housing and Financial Wealth, Financial Deregulation and Consumption--The Swedish Case," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(3), pages 421-439, September.
- Campbell, John Y & Shiller, Robert J, 1987. "Cointegration and Tests of Present Value Models," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1062-1088, October.
- John Y. Campbell & Robert J. Shiller, 1986. "Cointegration and Tests of Present Value Models," Cowles Foundation Discussion Papers 785, Cowles Foundation for Research in Economics, Yale University.
- Campbell, John & Shiller, Robert, 1987. "Cointegration and Tests of Present Value Models," Scholarly Articles 3122490, Harvard University Department of Economics.
- John Y. Campbell & Robert J. Shiller, 1986. "Cointegration and Tests of Present Value Models," NBER Working Papers 1885, National Bureau of Economic Research, Inc.
- Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June.
- Berg, Lennart, 1994. "Household Savings and Debts: The Experience of the Nordic Countries," Oxford Review of Economic Policy, Oxford University Press, vol. 10(2), pages 42-53, Summer.
- Clements,Michael & Hendry,David, 1998. "Forecasting Economic Time Series," Cambridge Books, Cambridge University Press, number 9780521634809, December.
- Clements,Michael & Hendry,David, 1998. "Forecasting Economic Time Series," Cambridge Books, Cambridge University Press, number 9780521632423, December.
- Haug, Alfred A, 1996. "Blanchard's Model of Consumption: An Empirical Study," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(2), pages 169-177, April.
- John Y. Campbell & N. Gregory Mankiw, 1989. "Consumption, Income and Interest Rates: Reinterpreting the Time Series Evidence," NBER Chapters,in: NBER Macroeconomics Annual 1989, Volume 4, pages 185-246 National Bureau of Economic Research, Inc.
- John Y. Campbell & N. Gregory Mankiw, 1989. "Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence," NBER Working Papers 2924, National Bureau of Economic Research, Inc.
- Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
- Franses, Philip Hans, 1992. "The Norwegian Consumption Function: A Comment," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 455-459, August.
- 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, vol. 88(352), pages 661-692, December.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Banerjee, Anindya & Hendry, David F, 1992. "Testing Integration and Cointegration: An Overview," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 225-255, August.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, April.
- Hendry, David F & Doornik, Jurgen A, 1997. "The Implications for Econometric Modelling of Forecast Failure," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(4), pages 437-461, September.
- Michael P. Clements & David F. Hendry, 2001. "Forecasting Non-Stationary Economic Time Series," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262531895. Full references (including those not matched with items on IDEAS)