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|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.newyorkfed.org/
More information through EDIRC
|Order Information:|| Email: |
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.:
- repec:att:wimass:9305 is not listed on IDEAS
- 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 113-19, January.
- Campbell, John Y & Mankiw, N Gregory, 1990.
"Permanent Income, Current Income, and Consumption,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 8(3), pages 265-79, July.
- Campbell, John Y. & Mankiw, N. Gregory, 1990. "Permanent Income, Current Income, and Consumption," Scholarly Articles 3353762, Harvard University Department of Economics.
- John Y. Campbell & N. Gregory Mankiw, 1987. "Permanent Income, Current Income, and Consumption," NBER Working Papers 2436, National Bureau of Economic Research, Inc.
- 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.).
- 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.
- 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.
- 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.
- 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 205-25, February.
- 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.
- 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.
- Antzoulatos, Angelos A., 1994. "Borrowing constraints, income expectations and the Euler equation : Theory and evidence," Economics Letters, Elsevier, vol. 45(3), pages 323-327.
- 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.
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 references are entirely missing, you can add them using this form.