An Alternative Nonlinear Perspective on the Consumption, Income and Wealth Relationship

Mark Holmes () and Xin Shen ()

Economics Bulletin, 2012, vol. 32, issue 1, 766-777

Abstract: We provide new evidence on the relationship between consumption expenditure and key drivers namely, income and wealth. Using a testing procedure advocated by Bierens applied to US data, we find evidence that all series are in fact stationary around a nonlinear deterministic trend and are co-trended insofar as they share a common nonlinear deterministic trend. This can be seen in the context of cointegration-based studies that have often found against the existence of a long-run relationship. We also contribute to the ‘great ratios' debate concerning the time series properties of the average propensity to consume.

Keywords: Consumption; Income; Wealth; Average Propensity to Consume; Nonlinear; Co-trending. (search for similar items in EconPapers)
JEL-codes: E0 E2 (search for similar items in EconPapers)
Date: 2012-02-27
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Citations: View citations in EconPapers (1)

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