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Stagflation and stability of the Keynesian consumption function: an empricial analysis


  • Abu Wahid


In macroeconomics, consumption functions supposedly demonstrate stable relationships between consumption and disposable income. This letter constructs a simple consumption function of Keynesian type. It also estimates the function and tests if any structural change had taken place in this function in 1974 following the beginning of the stagflationary era caused by the great oil-crunch of the early 1970s. The estimation and testing follow standard statistical procedures and use annual time series data for Canada (1947-78). The findings suggest that the Keynesian function for Canada had not undergone any significant structural change in 1974. The function was found quite stable in terms of intercept as well as slope parameters.

Suggested Citation

  • Abu Wahid, 2000. "Stagflation and stability of the Keynesian consumption function: an empricial analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 7(6), pages 357-359.
  • Handle: RePEc:taf:apeclt:v:7:y:2000:i:6:p:357-359 DOI: 10.1080/135048500351276

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    References listed on IDEAS

    1. Ian Domowitz & R. Glenn Hubbard & Bruce C. Petersen, 1986. "Business Cycles and the Relationship Between Concentration and Price-Cost Margins," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 1-17, Spring.
    2. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-947, October.
    3. Schmalensee, Richard, 1989. "Inter-industry studies of structure and performance," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 16, pages 951-1009 Elsevier.
    4. Roeger, Werner, 1995. "Can Imperfect Competition Explain the Difference between Primal and Dual Productivity Measures? Estimates for U.S. Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 316-330, April.
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