Permanent consumption under Robert Hall's conception. An econometric study for South America, 1960-2019
Keywords:
Consumption, lagged consumption, Panel data modelsAbstract
The aim of this paper consists in analyzing the behavior of the private per capita consumption that was theoretically described by Robert Hall. The conception of this author is that consumption can be formalized as a random walk, this idea comes from the conclusion about the theoretical approaches of Irving Fisher; M. Friedman; Ando and Modigliani. To prove if consumption has or not this pattern, it is instrumented an analysis for South America with a dynamic panel data model using the method proposed by Arellano and Bond, for the period 1960-2019.
JEL Classification: E21; C23.
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References
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Arellano, M. and Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. The Review of Economic Studies, (April, Vol. 58, No. 2, pp. 277-297. https://doi.org/10.2307/2297968
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Fisher, I. (1930). The Theory of Interest, as determined by Impatience to Spend Income and Opportunity to Invest it. New York: Macmillan.
Flavin, M.A. (1981). The adjustment of consumption to changing expectations about future income. Journal of Political Economy, Vol. 89, no.5, pp. 974-1009. https://doi.org/10.1086/261016
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Gujarati, D., y Porter, D. (2010). Econometría, México, D.F.: McGraw Hill/Interamericana editores S.A. de C.V.
Hadri, K. (2000). Testing for stationarity in heterogeneous panel data. The Econometrics Journal, Vol. 3 (2), pp. 148-161. https://doi.org/10.1111/1368-423X.00043
Hall, R. (1978). Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence. Journal of Political Economy, December, Vol. 86, No. 6, pp. 971-987. https://doi.org/10.1086/260724
Hansen, A. (1953). A Guide to Keynes, New York: McGraw Hill.
Hernández, G. y Chahín, D. (2008). Apuntes de teoría del consumo. Documentos de Economía de la Universidad Javeriana en Bogotá, Colombia.
Im, K.; Pesaran, M.H. y Shin, Y. (2003). Testing for Unit Roots in Heterogeneous Panels. Journal of Econometrics, Vol.115 (1), pp.53-74. https://doi.org/10.1016/S0304-4076(03)00092-7
Islam, T. and Zafar, Z. (2017). A Time Series Analysis of Aggregate Consumption Function for Pakistan. Argumenta Oeconomica, Vol. 38(1), pp. 243-255. http://doi.org/10.15611/aoe.2017.1.09
Jaeger, A. (1992). Does consumption take a random walk? Some evidence from macroeconomic forecasting data. The Review of Economics and Statistics, Vol 74 (4), pp. 607-614. http://doi.org/10.2307/2109374
Keho, Y. (2019). Myopia, liquidity constraints and private consumption: the case of Cote d’Ivoire. Cogent Economics & Finance, Vol. 7 (1), pp. 1-10. https://doi.org/10.1080/23322039.2019.1608052
Keynes, J. (2014). Teoría general de la ocupación, el interés y el dinero. México, D.F.: Fondo de cultura económica.
Levin, A.; Lin, Chien-fu and Chu, C. (2002). Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties. Journal of Econometrics, Vol. 108(1), pp. 1-24. http://doi.org/10.1016/S0304-4076(01)00098-7
Liaqat, S.; Bunnika, P. and Khan K. (2018). China’s Consumption Function: An Empirical Test of Absolute and Permanent Income Hypothesis. Global Economics Review (GER), Vol. 3 (1), pp. 90-97. http://doi.org/10.31703/ger.2018(III-I).10
Lucas, R. Jr. (1987). Models of Business Cycles, Oxford: Basil Blackwell.
Malley, J., and Molana, H. (2002). The life cycle permanent income model: a reinterpretation and supporting evidence. Working Papers 2002_17, Business School - Economics University of Glasgow, pp. 1025-1041. https://doi.org/10.1007/s00181-006-0066-5
Reis, R. (2009). The time-series properties of aggregate consumption: implications for the costs of fluctuations. Journal of the European Economic Association, Vol. 7(4), pp. 722-753. http://doi.org/10.3386/w11297
Robertson, D. (1933). Saving and Hoarding. The Economic Journal, Vol. 43, No. 171, pp. 399-413. http://doi.org/10.2307/2224283
Ando, A. and Modigliani, F. (1963). The life cycle hypothesis of saving: aggregate implications and tests. The American Economic Review, Part 1, March, Vol. 53, No. 1, pp. 55-84. https://www.jstor.org/stable/1817129
Arellano, M. and Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. The Review of Economic Studies, (April, Vol. 58, No. 2, pp. 277-297. https://doi.org/10.2307/2297968
Azar, T. (1998). Les déterminants du cycle et de la tendance des ventes au détail au Canada: analyse de cointégration et modèle à correction d'erreurs, Mémoire de maîtrise inédit, École des hautes études commerciales, Université de Montréal, Canadá.
Baltagi, B. (2005). Econometric Analysis of Panel Data, John Wiley & Sons, Ltd.
Drakopoulos, S. (2020). The Marginalization of Absolute and Relative Income Hypotheses of Consumption and the Role of Fiscal Policy. MPRA Paper No. 98569, pp.1-33. https://mpra.ub.uni-muenchen.de/98569/1/MPRA_paper_98569.pdf
Fisher, I. (1930). The Theory of Interest, as determined by Impatience to Spend Income and Opportunity to Invest it. New York: Macmillan.
Flavin, M.A. (1981). The adjustment of consumption to changing expectations about future income. Journal of Political Economy, Vol. 89, no.5, pp. 974-1009. https://doi.org/10.1086/261016
Foster, J. (2020). The US consumption function: a new perspective. Journal of Evolutionary Economics, pp. 1-26. http://doi.org/10.1007/s00191-020-00711-6
Friedman, M. (1957). The Permanent Income Hypothesis. In A Theory of the Consumption Function, Princeton University Press-National Bureau of Economic Research, pp. 20–37. http://doi.org/10.2307/j.ctv39x7zh.6
Gujarati, D., y Porter, D. (2010). Econometría, México, D.F.: McGraw Hill/Interamericana editores S.A. de C.V.
Hadri, K. (2000). Testing for stationarity in heterogeneous panel data. The Econometrics Journal, Vol. 3 (2), pp. 148-161. https://doi.org/10.1111/1368-423X.00043
Hall, R. (1978). Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence. Journal of Political Economy, December, Vol. 86, No. 6, pp. 971-987. https://doi.org/10.1086/260724
Hansen, A. (1953). A Guide to Keynes, New York: McGraw Hill.
Hernández, G. y Chahín, D. (2008). Apuntes de teoría del consumo. Documentos de Economía de la Universidad Javeriana en Bogotá, Colombia.
Im, K.; Pesaran, M.H. y Shin, Y. (2003). Testing for Unit Roots in Heterogeneous Panels. Journal of Econometrics, Vol.115 (1), pp.53-74. https://doi.org/10.1016/S0304-4076(03)00092-7
Islam, T. and Zafar, Z. (2017). A Time Series Analysis of Aggregate Consumption Function for Pakistan. Argumenta Oeconomica, Vol. 38(1), pp. 243-255. http://doi.org/10.15611/aoe.2017.1.09
Jaeger, A. (1992). Does consumption take a random walk? Some evidence from macroeconomic forecasting data. The Review of Economics and Statistics, Vol 74 (4), pp. 607-614. http://doi.org/10.2307/2109374
Keho, Y. (2019). Myopia, liquidity constraints and private consumption: the case of Cote d’Ivoire. Cogent Economics & Finance, Vol. 7 (1), pp. 1-10. https://doi.org/10.1080/23322039.2019.1608052
Keynes, J. (2014). Teoría general de la ocupación, el interés y el dinero. México, D.F.: Fondo de cultura económica.
Levin, A.; Lin, Chien-fu and Chu, C. (2002). Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties. Journal of Econometrics, Vol. 108(1), pp. 1-24. http://doi.org/10.1016/S0304-4076(01)00098-7
Liaqat, S.; Bunnika, P. and Khan K. (2018). China’s Consumption Function: An Empirical Test of Absolute and Permanent Income Hypothesis. Global Economics Review (GER), Vol. 3 (1), pp. 90-97. http://doi.org/10.31703/ger.2018(III-I).10
Lucas, R. Jr. (1987). Models of Business Cycles, Oxford: Basil Blackwell.
Malley, J., and Molana, H. (2002). The life cycle permanent income model: a reinterpretation and supporting evidence. Working Papers 2002_17, Business School - Economics University of Glasgow, pp. 1025-1041. https://doi.org/10.1007/s00181-006-0066-5
Reis, R. (2009). The time-series properties of aggregate consumption: implications for the costs of fluctuations. Journal of the European Economic Association, Vol. 7(4), pp. 722-753. http://doi.org/10.3386/w11297
Robertson, D. (1933). Saving and Hoarding. The Economic Journal, Vol. 43, No. 171, pp. 399-413. http://doi.org/10.2307/2224283
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Published
2021-05-03
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Permanent consumption under Robert Hall’s conception. An econometric study for South America, 1960-2019. (2021). Análisis Económico, 36(92), 45-62. https://analisiseconomico.azc.uam.mx/index.php/rae/article/view/617
