Imperfect Information and Consumption in the United States and the United Kingdom

David Demery and Nigel W. Dick

Economica, 1999, vol. 66, issue 263, 375-387

Abstract: Pischke (1995) has argued that imperfect information may account for the failure of Hall's permanent income hypothesis to explain the behaviour of aggregate consumption. We identify the restrictions that Pischke's theory places on the dynamics of aggregate consumption and test them using quarterly data for the United Kingdom and United States. Our results suggest that, while Pischke's model explains some features of the data which the Hall model cannot, it is formally rejected.

Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:bla:econom:v:66:y:1999:i:263:p:375-387

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