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International evidence on sticky consumption growth

Author

Listed:
  • Carroll, Christopher D.
  • Slacalek, Jiri
  • Sommer, Martin

Abstract

We estimate the degree of 'stickiness' in aggregate consumption growth (sometimes interpreted as reflecting consumption habits) for thirteen advanced economies. We find that, after controlling for measurement error, consumption growth has a high degree of auto-correlation, with a stickiness parameter of about 0.7 on average across countries. The sticky-consumption-growth model outperforms the random walk model of Hall (1978), and typically fits the data better than the popular Campbell and Mankiw (1989) model. In several countries, the sticky-consumption-growth and Campbell-Mankiw models work about equally well. JEL Classification: C6, D9, E2

Suggested Citation

  • Carroll, Christopher D. & Slacalek, Jiri & Sommer, Martin, 2008. "International evidence on sticky consumption growth," Working Paper Series 886, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2008886
    Note: 1111765
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    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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