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Hong Kong's Consumption Function Revisited

Author

Listed:
  • Li-gang Liu

    (Research Department, Hong Kong Monetary Authority)

  • Laurent Pauwels

    (Research Department, Hong Kong Monetary Authority)

  • Andrew Tsang

    (Research Department, Hong Kong Monetary Authority)

Abstract

This paper revisits the relationship among consumption, income and wealth using Hong Kong data. We find that the permanent income hypothesis is weakly supported by Hong Kong¡¦s consumption data prior to 1997, but it is not supported for the sample period after 1997 and the whole sample period spanning from 1984 to 2006. Furthermore, we find that both anticipated and unanticipated income and wealth effects have influences on Hong Kong¡¦s consumption. While temporary tax changes may have some impact on consumption of durable goods, the evidence that they also affect overall consumption remains limited.

Suggested Citation

  • Li-gang Liu & Laurent Pauwels & Andrew Tsang, 2007. "Hong Kong's Consumption Function Revisited," Working Papers 0716, Hong Kong Monetary Authority.
    • Handle: RePEc:hkg:wpaper:0716
    as

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    File URL: http://www.info.gov.hk/hkma/eng/research/working/pdf/HKMAWP07_16_full.pdf
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Funke, Michael & Paetz, Michael & Pytlarczyk, Ernest, 2011. "Stock market wealth effects in an estimated DSGE model for Hong Kong," Economic Modelling, Elsevier, vol. 28(1-2), pages 316-334, January.
    2. Li-gang Liu & Laurent Pauwels & Andrew Tsang, 2007. "How Large is the Wealth Effect on Hong Kong¡¦s Consumption? Evidence from a Habit Formation Model of Consumption," Working Papers 0720, Hong Kong Monetary Authority.
    3. repec:zbw:bofitp:2009_014 is not listed on IDEAS
    4. Funke, Michael & Paetz, Michael & Pytlarczyk, Ernest, 2011. "Stock market wealth effects in an estimated DSGE model for Hong Kong," Economic Modelling, Elsevier, vol. 28(1-2), pages 316-334, January.

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    More about this item

    Keywords

    Permanent income hypothesis; consumption smoothness; anticipated and unanticipated effects;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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