Hong Kong's Consumption Function Revisited

Li-gang Liu, Laurent Pauwels and Andrew Tsang
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Li-gang Liu: Research Department, Hong Kong Monetary Authority

No 716, Working Papers from Hong Kong Monetary Authority

Abstract: This paper revisits the relationship among consumption, income and wealth using Hong Kong data. We find that the permanent income hypothesis is weakly supported by Hong Kong¡¦s consumption data prior to 1997, but it is not supported for the sample period after 1997 and the whole sample period spanning from 1984 to 2006. Furthermore, we find that both anticipated and unanticipated income and wealth effects have influences on Hong Kong¡¦s consumption. While temporary tax changes may have some impact on consumption of durable goods, the evidence that they also affect overall consumption remains limited.

Keywords: Permanent income hypothesis; consumption smoothness; anticipated and unanticipated effects (search for similar items in EconPapers)
JEL-codes: E21 E32 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2007-11
New Economics Papers: this item is included in nep-cna and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:hkg:wpaper:0716

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