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Consumption Theory

Author

Listed:
  • Emilio Fernandez-Corugedo

Abstract

There is no doubt that aggregate consumption is a key variable for policy makers. The aim of this handbook is to familiarise the reader with the key theories that have been used to model and forecast consumption and draw out their implications for policy analysis. This handbook is intended to be accessible to those working in policy-related departments without losing economic rigour. Important concepts are highlighted in a series of four boxes and technical details in four appendices. The handbook pays particular attention to the role of forward-looking agents and their reaction to policy announcements; the role of interest rates in consumption and the role of other variables thought to affect consumption behaviour such as taxes, the structure of both the banking system and the stock market, age and wealth distributions and the volatility of economic variables. Unfortunately, different consumption theories can lead to different policy prescriptions and as such a clear message arises from this handbook: there is no single consumption theory that can explain consumption behaviour in all economies; economists must therefore investigate what they think explains consumption in their country.

Suggested Citation

  • Emilio Fernandez-Corugedo, 2004. "Consumption Theory," Handbooks, Centre for Central Banking Studies, Bank of England, number 23.
  • Handle: RePEc:ccb:hbooks:23
    as

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    File URL: http://www.bankofengland.co.uk/education/Documents/ccbs/handbooks/pdf/ccbshb23.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Consumption Theory;

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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