International Evidence on Sticky Consumption Growth
Posted: 26 Sep 2008
There are 3 versions of this paper
International Evidence on Sticky Consumption Growth
International Evidence on Sticky Consumption Growth
Date Written: March 3, 2008
Abstract
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.
Keywords: Sticky Expectations, Consumption Dynamics, Habit Formation
JEL Classification: E21, F41
Suggested Citation: Suggested Citation
