Non-linear consumption dynamics
Taking explicitly into account the forward-looking nature of consumption, this paper derives a non-linear equation for consumption growth in which the coefficient of contemporaneous expected income growth is an increasing (decreasing) function of lagged variables positively (negatively) correlated with future income growth. Estimating it with aggregate data, the paper finds statistically and economically significant non-linear consumption dynamics for three major industrial countries. These dynamics imply, among other things, that monetary policy may have a more immediate and profound effect on consumption, and through it on real economic activity, than commonly thought.
|Date of creation:||1997|
|Contact details of provider:|| Postal: 33 Liberty Street, New York, NY 10045-0001|
Web page: http://www.newyorkfed.org/
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Campbell, John Y. & Mankiw, N. Gregory, 1990.
"Permanent Income, Current Income, and Consumption,"
3353762, Harvard University Department of Economics.
- Campbell, John Y. & Mankiw, N. Gregory, 1991. "The response of consumption to income : A cross-country investigation," European Economic Review, Elsevier, vol. 35(4), pages 723-756, May.
- Shea, J., 1993.
"Myopia, Liquidity Constraints, and Aggregate Consumption: A Simple Test,"
9305, Wisconsin Madison - Social Systems.
- Shea, John, 1995. "Myopia, Liquidity Constraints, and Aggregate Consumption: A Simple Test," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 798-805, August.
- Caballero, Ricardo J, 1995.
"Near-Rationality, Heterogeneity, and Aggregate Consumption,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 27(1), pages 29-48, February.
- Ricardo J. Caballero, 1992. "Near-Rationality, Heterogeneity and Aggregate Consumption," NBER Working Papers 4035, National Bureau of Economic Research, Inc.
- Kim, Chulsoo, 1996. "Measuring Deviations from the Permanent Income Hypothesis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 205-225, February.
- Mark W. French & Daniel E. Sichel, 1991.
"Cyclical patterns in the variance of economic activity,"
Finance and Economics Discussion Series
161, Board of Governors of the Federal Reserve System (U.S.).
- French, Mark W & Sichel, Daniel E, 1993. "Cyclical Patterns in the Variance of Economic Activity," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 113-119, January.
- Carroll, Christopher D & Fuhrer, Jeffrey C & Wilcox, David W, 1994.
"Does Consumer Sentiment Forecast Household Spending? If So, Why?,"
American Economic Review,
American Economic Association, vol. 84(5), pages 1397-1408, December.
- Christopher D. Carroll & Jeffery C. Fuhrer & David W. Wilcox, 1994. "RATS code for Does Consumer Sentiment Forecast Household Spending? If So, Why?," QM&RBC Codes 49, Quantitative Macroeconomics & Real Business Cycles.
- Christopher D. Carroll & Jeffrey C. Fuhrer & David W. Wilcox, 1991. "Does consumer sentiment affect household spending? If so why?," Finance and Economics Discussion Series 168, Board of Governors of the Federal Reserve System (U.S.).
- Agell, Jonas & Berg, Lennart, 1996. " Does Financial Deregulation Cause a Consumption Boom?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(4), pages 579-601, December.
- Allan D. Brunner, 1997.
"On The Dynamic Properties Of Asymmetric Models Of Real GNP,"
The Review of Economics and Statistics,
MIT Press, vol. 79(2), pages 321-352, May.
- Allan D. Brunner, 1994. "On the dynamic properties of asymmetric models of real GNP," International Finance Discussion Papers 489, Board of Governors of the Federal Reserve System (U.S.).
- Antzoulatos, Angelos A., 1994. "Borrowing constraints, income expectations and the Euler equation : Theory and evidence," Economics Letters, Elsevier, vol. 45(3), pages 323-327.
When requesting a correction, please mention this item's handle: RePEc:fip:fednrp:9726. 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: (Amy Farber)
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.