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Estimation of the Consumption Function: A Systems Approach to Employment Effects on the Purchases of Durables


  • Michael McAleer
  • Alan A. Powell
  • Peter Dixon
  • Tony Lawson


This paper analyzes a systems approach to employment effects by formulating CONDELES, the aggregate consumption function associated with Durables in the Extended Linear Expenditure System. The complete system, with disposable income, prices, the real interest rate and lagged stocks is fitted to quarterly Australian data using full-information maximum likelihood. The results are mixed. Stable, significant estimates of subsistence parameters, marginal budget shares and the marginal propensity to consume are obtained. On the negative side, implausibly low marginal budget shares were found for durables and high positive serial correlation in the residuals remained.

Suggested Citation

  • Michael McAleer & Alan A. Powell & Peter Dixon & Tony Lawson, 1979. "Estimation of the Consumption Function: A Systems Approach to Employment Effects on the Purchases of Durables," Working Papers 349, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:349

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    Cited by:

    1. Philippa Dee, 1989. "The Effects of Government size on Economic Performance: a Quantitative Assessment of a Budget Reduction," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 22(1), pages 24-38.

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