Habit persistence, non-separability between consumption and leisure, or rule-of thumb consumers: which accounts for the predictability of consumption growth?

Michael Kiley

No 2007-48, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Consumption growth is predictable, a basic violation of the permanent-income hypothesis. This paper examines three possible explanations: rule-of-thumb behavior, in which households allow consumption to track per-period income flows rather than permanent income; habit persistence; and non-separability in preferences over consumption and leisure. The data appear most consistent with non-separable preferences over consumption and leisure.

Keywords: Consumption (Economics); Consumer behavior (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-cbe and nep-mac
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Habit Persistence, Nonseparability between Consumption and Leisure, or Rule-of-Thumb Consumers: Which Accounts for the Predictability of Consumption Growth? (2010)
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