An Econometric Study of Private Consumption Expenditure in Sweden
A Consumption function based on the life-cycle hypothesis is estimated using Swedish anuual data for the period 1970-1998. Hendry`s general to specific approach is applied using an error correction model in order to arrive at the preferred equation. In order to confirm the estimated cointegrating relationship, the Johansen procedure is employed. The preferred equation displays a good fit over the sample period and diagnostic tests indicate that the parameters are robust over time. The long run properties and the dynamic response to shocks in the exogenous variable are evaluated using a system of simultaneous equations containing the preferred eauation and a disaggregated form of the savings identity. Results from the simulations are in accordance with intuition and consistent with the life-cycle hypothesis.
|Date of creation:||01 Dec 1999|
|Contact details of provider:|| Postal: National Institute of Economic Research, P.O. Box 3116, SE-103 62 Stockholm, Sweden|
Phone: 46-(0)8-453 59 00
Fax: 46-(0)8-453 59 80
Web page: http://www.konj.se/
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- Engle, Robert & Granger, Clive, 2015.
"Co-integration and error correction: Representation, estimation, and testing,"
Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
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- Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, April.
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- Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, vol. 88(352), pages 661-692, December.
- Farebrother, R W, 1980. "The Durbin-Watson Test for Serial Correlation When There Is No Intercept in the Regression," Econometrica, Econometric Society, vol. 48(6), pages 1553-1563, September.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
- Lyhagen, Johan, 1997. "The Effect of Precautionary Saving on Consumption in Sweden," Working Papers 58, National Institute of Economic Research.
- Peter Kennedy, 2003. "A Guide to Econometrics, 5th Edition," MIT Press Books, The MIT Press, edition 5, volume 1, number 026261183x, September. Full references (including those not matched with items on IDEAS)
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