Chapter

Consumption Behaviour in the US

Rohit

in It's Not Over

Published in print January 2013 | ISBN: 9780198088417
Published online January 2013 | e-ISBN: 9780199082292 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780198088417.003.0008
Consumption Behaviour in the US

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Chapter 8 tests the hypotheses made in the theoretical models of Chapter 5 and Chapter 6 on the wealth effect and the debt effect on consumption using advanced econometric methods. Since macroeconomic level time series data generally have unit roots, a cointegration analysis between these variables is performed. It is found that the wealth effect indeed was one of the main contributors to increasing consumption which more than compensated for underconsumption in the 1990s. A similar result is shown for the debt effect. Both these hypotheses are tested with respect to household data too and the results are no different from the overall macroeconomic picture.

Keywords: wealth effect; debt effect; cointegration; US household data; unit roots; time-series econometrics

Chapter.  7180 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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