Intertemporal Substitution in Consumption
Does a higher real interest rate induce significant postponement of consumption? According to the theory developed here, this question can be answered by studying the relation between the rate of growth of consumption and expected real interest rates. In postwar data for the United States, expected real returns have declined over time in the stock market and for savings accounts. Over the same period, the rate of growth of consumption has been almost steady. The paper concludes that intertemporal substitution is weak, for if it were strong, the growth rate of consumption would have declined.
|Date of creation:||Jul 1981|
|Publication status:||published as Journal of Political Economy, Vol. 96, No. 2, pp. 339-357, (1988).|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:0720. 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: ()
If references are entirely missing, you can add them using this form.