Why is Consumption so Seasonal?
UK and US data suggest that consumption seasonality is both stochastic and characterised by permanent changes, that is there are seasonal unit roots in consumption. This paper explains the changes in the seasonal pattern of UK consumption and in doing so offers new insights into the much studied business cycle characteristics of consumption. We find that changes in consumption seasonality have zero or negative correlation with changes in the income seasonal, an observation which casts doubt on liquidity constraints as an important determinant of consumption fluctuations. Neither is consumption seasonality driven by precautionary saving, rates of return or climatic variables. Instead, seasonality in consumption is induced by the utility function, with the evidence ruling out seasonal habits or periodic effects. The evidence is consistent with seasonality changing due to preference shocks which we interpret, based on econometric evidence and a historical survey, as changes in customs. While these changes are slow moving they generate substantial variation in seasonal fluctuations in the post-war period, with Christmas consumption gaining in importance. Our results suggest that seasonal fluctuations may differ significantly from business cycle fluctuations and suggest that preference shifts should be considered as a possible source of non-seasonal fluctuations in consumption.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Oct 1995|
|Date of revision:|
|Contact details of provider:|| Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP|
When requesting a correction, please mention this item's handle: RePEc:cep:cepdps:dp0269. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.