ON THE STABILITY OF THE EXCESS SENSITIVITY OF AGGREGATE CONSUMPTION GROWTH IN THE US

Gerdie Everaert, Lorenzo Pozzi () and Ruben Schoonackers

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: This paper investigates the degree of time variation in the excess sensitivity of aggregate con- sumption growth to anticipated aggregate disposable income growth using quarterly US data over the period 1953-2014. Our empirical framework contains the possibility of stickiness in aggregate consumption growth and takes into account measurement error and time aggregation. Our empirical specification is cast into a Bayesian state space model and estimated using Markov Chain Monte Carlo (MCMC) methods. We use a Bayesian model selection approach to deal with the non-regular test for the null hypothesis of no time variation in the excess sensitivity parameter. Anticipated disposable income growth is calculated by incorporating an instrumental variables estimation approach into our MCMC algorithm. Our results suggest that the excess sensitivity parameter in the US is stable at around 0.24 over the entire sample period.

Keywords: Excess sensitivity; time-variation; consumption; income; MCMC; Bayesian model selection (search for similar items in EconPapers)
JEL-codes: C11 C22 C26 E21 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2016-01
New Economics Papers: this item is included in nep-ecm and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: On the Stability of the Excess Sensitivity of Aggregate Consumption Growth in the USA (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:16/917

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