Wealth Effects and Exogeneity: The Norwegian Consumption Function 1966(1)-1989(4)

P Anders Brodin and Ragnar Nymoen ()

Oxford Bulletin of Economics and Statistics, 1992, vol. 54, issue 3, 431-54

Abstract: The authors analyze the determinants of Norwegian households' consumption expenditure, using quarterly data for the period 1966(1)-1989(4). Expenditure, income and a broad measure of households wealth appear to form a cointegrating relationship. Likelihood ratio tests do not disprove that the cointegrating vector can be estimated efficiently from a single equation, i.e. a "consumption function." On this basis, a dynamic model of private expenditure is developed. Despite structural breaks in both the income and wealth processes, the consumption function displays considerable parameter constancy. Thus, the model can be attributed at least some degree of autonomy and structural invariance. On the basis of the parameter invariance tests, the "Lucas-critique" is in fact refuted. Consequently, the rational expectations approach yields (surprisingly) little insight into the causes of "breakdown" in pre-existing models. Instead their results suggest a more prosaic "left out variables" explanation, namely long-run wealth effects. Copyright 1992 by Blackwell Publishing Ltd

Date: 1992
References: Add references at CitEc
Citations: View citations in EconPapers (12)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:obuest:v:54:y:1992:i:3:p:431-54

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0305-9049

Access Statistics for this article

Oxford Bulletin of Economics and Statistics is currently edited by Christopher Adam, Anindya Banerjee, Christopher Bowdler, David Hendry, Adriaan Kalwij, John Knight and Jonathan Temple

More articles in Oxford Bulletin of Economics and Statistics from Department of Economics, University of Oxford Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().