Does nonlinear econometrics confirm the macroeconomic models of consumption?

Fredj Jawadi

Economics Bulletin, 2008, vol. 5, issue 17, 1-11

Abstract: This article aims at checking whether the macroeconomic models of consumption are always verified to reproduce the dynamics of consumption habits. We show that even if the Keynesian theory of consumption is still checked as the disposable income is a significant explanatory variable of household consumption, the dynamics of consumption cannot be reproduced anymore through the Post-Keynesian models like that of Brown (1952). While introducing nonlinearity and using the recent developments of Smooth Transition Regression (STR) models, we propose an extension for Brown's model and develop a Nonlinear Macroeconometric Model of Consumption (NMMC). Nonlinearity is justified by the structural breaks induced by habit formation and the irregularity in the evolution of the saving ratio since the seventies. Based on American and French data, our empirical results show that our model is statistically appropriate and leads to better performance than the usual macroeconomic specification of Brown.

JEL-codes: C1 E2 (search for similar items in EconPapers)
Date: 2008-04-21
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Citations: View citations in EconPapers (3)

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