Consumption and Aggregate Constraints: International Evidence

Joseph DeJuan () and Maria Luengo-Prado

Macroeconomics from University Library of Munich, Germany

Abstract: This paper documents that region-level consumption exhibits excess sensitivity to lagged income in Italy, Japan, Spain, the United Kingdom and West Germany. However, region-specific idiosyncratic) consumption exhibits substantially less sensitivity to lagged region-specific income. Also, excess sensitivity is inversely related to standard measures of openness and credit market integration and for most countries, it has decreased over time. These findings are consistent with those reported in Ostergaard, Sorensen & Yosha (2002) for U.S. state-level and Canadian province-level data, and provide empirical support for the hypothesis that closed-economy constraints may partly be responsible for the excess sensitivity phenomenon in aggregate data.

Keywords: Permanent Income Hypothesis; Consumption; Regional Data; Openness (search for similar items in EconPapers)
JEL-codes: E21 F41 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2005-01-14
New Economics Papers: this item is included in nep-mac
Note: Type of Document - pdf; pages: 21
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Consumption and Aggregate Constraints: International Evidence* (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0501018

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