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Excess sensitivity of consumption using micro data in the UK

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  • Yu, Ge

Abstract

The impact of the subjective variables specific to individual financial well being on economic outcomes is considered whether they are able to predict the growth of household consumption. Subjective variables include more information that is difficult to be identified or valued in previous empirical work compared to real income. The empirical analysis finds that the financial well being variables do predict the household consumption of non-durable goods. Higher financial expectations are correlated with less saving. I also find some of the rejection of the PIH is due to asymmetric preferences and the systematic heterogeneity in forecast errors.

Suggested Citation

  • Yu, Ge, 2005. "Excess sensitivity of consumption using micro data in the UK," MPRA Paper 548, University Library of Munich, Germany, revised 2006.
  • Handle: RePEc:pra:mprapa:548
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    References listed on IDEAS

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    More about this item

    Keywords

    systematic errors; expectations errors; PIH; REPIH; asymmetric preference; excess sensitivity;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical

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