The Stickiness of Aggregate Consumption Growth in OECD Countries: A Panel Data Analysis

Gerdie Everaert, L. Pozzi () and -
Additional contact information
-: -

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: This paper examines the sources of stickiness in aggregate consumption growth. We first derive a dynamic consumption equation which nests recent developments in consumption theory: ruleof- thumb consumption, habit formation, non-separabilities between both private consumption and hours worked and private consumption and government consumption, intertemporal substitution effects and precautionary savings. Next, we estimate this dynamic consumption equation for a panel of 15 OECD countries over the period 1972-2007 taking into account endogeneity issues and error cross-sectional dependence. To this end, we develop a generalised method of moments version of the common correlated effects pooled estimator and demonstrate its small sample behaviour using Monte Carlo simulations. The estimation results support the labour-consumption complementarity hypothesis, the rule-of-thumb consumption model and the notion that precautionary savings matter for the aggregate economy

Keywords: Sticky Consumption; Dynamic Panel; Cross-Sectional Dependence (search for similar items in EconPapers)
JEL-codes: C23 E21 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2010-05
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://wps-feb.ugent.be/Papers/wp_10_654.pdf (application/pdf)

Related works:
Working Paper: The Stickiness of Aggregate Consumption Growth in OECD Countries: A Panel Data Analysis (2011)
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:rug:rugwps:10/654

Access Statistics for this paper

More papers in Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration Contact information at EDIRC.
Bibliographic data for series maintained by Nathalie Verhaeghe ().