A Seasonal Model of Consumption

Birchenhall, C R, et al

Economic Journal, 1989, vol. 99, issue 397, 837-43

Abstract: In this paper, the authors present strong empirical evidence that the long-run income elasticity of U.K. nondurable consumers' expenditure and its short-run rate of adjustment both vary across seasons. Such variability in the behavior of consumers is consistent with the hypotheses that consumers have seasonal preferences and that they exhibit seasonally varying degrees of habit persistence. The tests are based on a modified form of the error correction methodology that allows for seasonally varying slope coefficients. Simulations for the dynamic responses of the authors' model illustrate the important policy implications of these results. Coauthors are R. C. Bladen-Hovell, A. P. L. Chui, Denise R. Osborn, and J. P. Smith. Copyright 1989 by Royal Economic Society.

Date: 1989
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