Are Our Data Relevant to the Theory? The Case of Aggregate Consumption Expenditures, and Empirical Consumption and Savings

Daniel T Slesnick

Journal of Business & Economic Statistics, 1998, vol. 16, issue 1, 52-61

Abstract: Personal consumption expenditures (PCE) in the National Income and Product Accounts are often used to investigate whether the time series properties of consumption are consistent with the permanent-income/life-cycle hypotheses. In this article, the author addresses the issue of the general quality of the PCE data and its definitional consistency with the typical model of the intertemporal allocation of consumption. He finds that, in terms of the population coverage and the consumption concept, the raw PCE data are unsuitable for the analysis of the permanent-income/life-cycle hypotheses. More fundamentally, adjustments to the data to provide great consistency with the theory alter critical conclusions concerning the time series properties of consumption.

Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:16:y:1998:i:1:p:52-61

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