Deconstructing the Consumption Function: New Tools and Old Problems

Pollock, D. S. G.; Lekka, Nikoletta

doi:10.2139/ssrn.294511

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Deconstructing the Consumption Function: New Tools and Old Problems

U of London Queen Mary & Westfield College Economics Working Paper No. 448

26 Pages Posted: 19 Dec 2001

See all articles by D. S. G. Pollock

D. S. G. Pollock

Queen Mary, University of London; GREQAM

Nikoletta Lekka

University of London - School of Economics and Finance

Date Written: December 2001

Abstract

In this paper, we analyse anew the relationship between aggregate income and consumption in the United Kingdom. Our analysis entails a close examination of the structure of the data, for which we employ a variety of spectral methods which depend on the concepts of Fourier analysis. We discover that fluctuations in the rate of growth of consumption tend to precede similar fluctuations in income, which contradicts a common supposition. We also highlight the difficulty of uncovering from the aggregate data a structural equation representing the behaviour of consumers.

Keywords: The consumption function, trend estimation, seasonal adjustment, spectral analysis

JEL Classification: C22

Suggested Citation: Suggested Citation

Pollock, D. S. G. and Lekka, Nikoletta, Deconstructing the Consumption Function: New Tools and Old Problems (December 2001). U of London Queen Mary & Westfield College Economics Working Paper No. 448, Available at SSRN: https://ssrn.com/abstract=294511 or http://dx.doi.org/10.2139/ssrn.294511