Consumption

Robert Hall ()

No 2265, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Macroeconomic research on consumption has been influenced profoundly by rational expectations. First, rational expectations together with the hypothesis of constant expected real interest rates implies that consumption should evolve as a random walk. Much of the research of the past decade has been devoted to testing the random walk hypothesis and to explaining its failure. Three branches of the literature have developed. The first relies on the durability of consumption to explain deviations from the random walk property. The second invokes liquidity constraints which block consumers from the credit market transactions needed to make consumption follow a random walk when income fluctuates up and down. The third branch dispenses with the assumption that expected real interest rates are constant. It attempts to explain deviations from the random walk in terms of intertemporal substitution.

Date: 1987-05
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (62)

Published as Modern Business Cycle Theory, Robert J. Barro, ed., Harvard University Press, Cambridge, MA 1989
Published as Hall, Robert E. "Potential Disruption From The Move To A Consumption Tax," American Economic Review, 1997, v87(2,May), 147-150.

Downloads: (external link)
http://www.nber.org/papers/w2265.pdf (application/pdf)

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:nbr:nberwo:2265

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w2265

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().