Co-breaking, cointegration, and weak exogeneity: Modelling aggregate consumption in Japan

Takamitsu Kurita

Economic Modelling, 2010, vol. 27, issue 2, 574-584

Abstract: This paper aims to estimate a parsimonious data-congruent model for aggregate real consumption in Japan using quarterly data over the past two decades. Testing co-breaking, cointegration and weak exogeneity plays an important role in pursuing the model reduction. It is demonstrated that co-breaking removes a deterministic shift caused by the collapse of the bubble economy in Japan in the early 1990s. Multivariate cointegration analysis then reveals that inflation plays a critical role in accounting for the long-run behaviour of the aggregate consumption. Further analysis finds that inflation and aggregate income are weakly exogenous with respect to a set of parameters of interest. Finally, a parsimonious data-congruent model for the aggregate consumption is estimated conditional on the set of weakly exogenous variables.

Keywords: Co-breaking; Cointegration; Weak; exogeneity; General-to-specific; approach; Aggregate; consumption (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264-9993(09)00202-8
Full text for ScienceDirect subscribers only

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:eee:ecmode:v:27:y:2010:i:2:p:574-584

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().