`Predictability of the Brazilian consumption growth: the relevance of anticipated growth rates in income and credit

Marcos Endo and Fabrio Gomes

Revista Brasileira de Economia - RBE, 2023, vol. 77, issue 4

Abstract: This paper examines the predictability of the Brazilian aggregate consumption growth, taking into account four factors: expected returns on assets (intertemporal substitution); anticipated growth rates in both income and credit (rule-of-thumb behavior and liquidity constraints); lagged consumption growth rate (habit formation). To accomplish such task, we investigate the presence of weak instruments, and apply suitable econometric tools to handle it. The findings suggest that estimations are plagued by weak instruments, and the point estimates suggest that growth rates in income and credit are relevant predictability factors. Finally, valid (robust) confidence intervals suggest that income growth rate and/or credit growth rate have significant predictive power for the Brazilian growth rate in consumption.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:epgrbe:v:77:y:2023:i:4:a:85603

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