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An International Comparison Of Long-Run Consumer Behaviour

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  • Chris Stewart

Abstract

Using the Johansen procedure I test for cointegration between consumption, private disposable income and inflation for 20 OECD countries over the period 1955-1994. There is evidence of cointegration for all countries. Plausible long-run consumption functions are obtained for 18 countries, and feature heterogeneous parameter estimates across countries. Evidence against a unit-income elasticity is obtained for 11 countries suggesting that one would be unwise to assume consumption is homogenous of degree one in income. Inflation is statistically significant and negative for only 7 countries indicating that it is not a fundamental explanatory factor of consumption for many countries. Cross-country regressions for the income elasticity reveal a negative association with income growth, the loglevel of income and income inequality and a positive correlation with the fiscal surplus/deficit and the availability of credit. The cross-country regressions of the inflation elasticity are consistent with inflation acting as a proxy for asset effects.

Suggested Citation

  • Chris Stewart, 2003. "An International Comparison Of Long-Run Consumer Behaviour," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 145-168, January -.
    • Handle: RePEc:ers:journl:v:vi:y:2003:i:1-2:p:145-168
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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