Deconstructing the Consumption Function: New Tools and Old Problems

Stephen Pollock and Nikoletta Lekka
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Stephen Pollock: Queen Mary, University of London
Nikoletta Lekka: Queen Mary, University of London

No 448, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: In this paper, we analyse anew the relationship between aggregate income and consumption in the United Kingdom. Our analysis entails a close examination of the structure of the data, for which we employ a variety of spectral methods which depend on the concepts of Fourier analysis. We discover that fluctuations in the rate of growth of consumption tend to precede similar fluctuations in income, which contradicts a common supposition. We also highlight the difficulty of uncovering from the aggregate data a structural equation representing the behaviour of consumers.

Keywords: Consumption function; Trend estimation; Seasonal adjustment; Spectral analysis (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
Date: 2001-12-01
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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:448

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