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Australian Consumption and Saving

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  • Lattimore, Ralph

Abstract

The paper examines the empirical determinants of consumption in Australia in the post-war period. The model provides an influential function for assets and suggests that the success of inflation in explaining the increase in the official saving ratio in the 1970s can be traced to its role in mimicking asset effects. The modeling and stylistic facts suggest that credit conditions, unemployment and income changes are important in explaining short-run movements in consumption. The fact that parameters were constant, even in a variant of the estimated model in which expectations were removed, suggests the unimportance of the Lucas critique. Orthodox life-cycle theory received only equivocal support. Demographics still play a role, but they are much weaker than would be implied by a model in which young risk-neutral agents can borrow freely to consume in advance of future income. Copyright 1994 by Oxford University Press.

Suggested Citation

  • Lattimore, Ralph, 1994. "Australian Consumption and Saving," Oxford Review of Economic Policy, Oxford University Press, vol. 10(2), pages 54-70, Summer.
  • Handle: RePEc:oup:oxford:v:10:y:1994:i:2:p:54-70
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    7. Hurst, Erik & Stafford, Frank, 2004. "Home Is Where the Equity Is: Mortgage Refinancing and Household Consumption," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 985-1014, December.
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    Cited by:

    1. László Kónya & Bekzod Abdullaev, 2015. "Does Ricardian equivalence hold in Australia? A revision based on testing super exogeneity with impulse-indicator saturation," Empirical Economics, Springer, vol. 49(2), pages 423-448, September.
    2. Morris A. Davis & Michael G. Palumbo, 2001. "A primer on the economics and time series econometrics of wealth effects," Finance and Economics Discussion Series 2001-09, Board of Governors of the Federal Reserve System (U.S.).
    3. Gordon de Brouwer, 1996. "Consumption and Liquidity Constraints in Australia and East Asia: Does Financial Integration Matter?," RBA Research Discussion Papers rdp9602, Reserve Bank of Australia.
    4. de Brouwer,Gordon, 1999. "Financial Integration in East Asia," Cambridge Books, Cambridge University Press, number 9780521651486, March.
    5. Malcom Edey & Luke Gower, 2000. "National Saving: Trends and Policy," RBA Annual Conference Volume,in: David Gruen & Sona Shrestha (ed.), The Australian Economy in the 1990s Reserve Bank of Australia.

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