Defining Consumption Behavior in a Multi-Country Model

Olivier Allais (), Loic Cadiou and Stephane Dees ()

Working Papers from CEPII research center

Abstract: This paper presents the consumption function of Marmotte, the multi-country model of the CEPII-CEPREMAP, and its estimation for the 17 countries of the model. The consumption function is based on the permanent income model. We have extended this model to account for the presence of habit formation and liquidity constraints in the consumption behaviors. The results obtained give us reasonable values for the consumption function of Marmotte. Differences across the 17 countries concern only the habit behaviors. However, these differences are not large enough to imply significant differences in terms of consumption responses to shocks in the simulations of the model.

Keywords: Consumption; habit formation; liquidity constraints; generalized method of moments (search for similar items in EconPapers)
JEL-codes: C33 C51 E21 E44 (search for similar items in EconPapers)
Date: 2001-02
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Persistent link: http://EconPapers.repec.org/RePEc:cii:cepidt:2001-02

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