 Consumption, Leisure, and MoneyApostolos Serletis and Libo Xu No 2019-08, Working Papers from Department of Economics, University of Calgary Abstract: This paper takes a parametric approach to demand analysis and tests the weak separa- bility assumptions that are often implicitly made in representative agent models of modern macroeconomics. The approach allows estimation and testing in a systems-of-equations con-text, using the Minflex Laurent flexible functional form for the underlying utility function and relaxing the assumption of fixed consumer preferences by assuming Markov regime switching. We generate inference consistent with both theoretical and econometric regularity. We strongly reject weak separability of consumption and leisure from real money balances as well as weak separability of consumption from leisure and real money balances, meaning that the inclusion of a money in economic models would be of quantitative importance. We also investigate the substitutability/complementarity relationship among dfferent categories of personal consumption expenditure (nondurables, durables, and services), leisure, and money.We find that the goods are net Morishima substitutes, but because of positive income effects they are gross complements. The implications for monetary policy are also briefly discussed. Date: 2019-07-06 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:clg:wpaper:2019-08 Access Statistics for this paper More papers in Working Papers from Department of Economics, University of Calgary Contact information at EDIRC. |
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