Intertemporal Consumption and Consumer Demand

Keith McLaren, H. Youn Kim and Russel Cooper

No 152, Econometric Society 2004 Australasian Meetings from Econometric Society

Abstract: This paper integrates two strands of studies on consumer demand and consumption and provides a unified framework for analyzing consumer behavior employing an intertemporal two-stage budgeting procedure. We take a modified AIDS framework for the demand system and derive a general Euler equation by allowing for life-cycle behavior and precautionary saving. We also investigate liquidity constraints and habit formation in consumption behavior. The demand system and the Euler equation constitute a system of recursive equations with cross-equation parameter restrictions. The system is estimated jointly taking explicit account of model-compatible autocorrelation

Keywords: consumer demand; Euler equation; two-stage budgeting (search for similar items in EconPapers)
JEL-codes: D92 E43 G12 (search for similar items in EconPapers)
Date: 2004-08-11
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:ausm04:152

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