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Wealth and Consumption. A Multicointegrated Model for the Unified Germany / Vermögen und Konsum. Ein multikointegriertes Modell für das vereinigte Deutschland

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  • Hassler Uwe

    (Freie Universität Berlin, Institut für Statistik und Ökonometrie, Boltzmannstraße 20, D-14195 Berlin)

Abstract

In a multicointegrated consumption function, consumption is explained by income and wealth, where wealth is measured as cumulated saving. This implies that income and wealth are cointegrated, and their impact on consumption cannot be estimated from a static cointegrating regression. It is proposed to estimate the parameters of an error-correction equation instead, and to solve it for the equilibrium relationship in levels. Then long-run multipliers of income and wealth can be computed. This technique is applied to German series with data for the unified Germany after 1990. The multicointegrated life cycle hypothesis is supported by the data.

Suggested Citation

  • Hassler Uwe, 2001. "Wealth and Consumption. A Multicointegrated Model for the Unified Germany / Vermögen und Konsum. Ein multikointegriertes Modell für das vereinigte Deutschland," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 221(1), pages 32-44, February.
    • Handle: RePEc:jns:jbstat:v:221:y:2001:i:1:p:32-44
    DOI: 10.1515/jbnst-2001-0104
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    References listed on IDEAS

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    Cited by:

    1. Forster, Katrin, 2005. "Stock Prices and Real Economic Activity Empirical Results for Germany," Research Notes 20, Deutsche Bank Research.
    2. Hassler, Uwe, 2007. "Multicointegration under measurement errors," Economics Letters, Elsevier, vol. 96(1), pages 38-44, July.

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