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International Evidence On Sticky Consumption Growth

Listed author(s):
  • Christopher D. Carroll
  • Jiri Slacalek
  • Martin Sommer

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 autocorrelation, 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.

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Paper provided by The Johns Hopkins University,Department of Economics in its series Economics Working Paper Archive with number 542.

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Date of creation: Mar 2008
Handle: RePEc:jhu:papers:542
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