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Cross Country Evidence on Consumption Persistence

Belbute, Jose and Caleiro, António (2010): Cross Country Evidence on Consumption Persistence.

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Abstract

The detection and measurement of the level of persistence on aggregate and disaggregate private consumption in Italy, Norway and United Kingdom are the main focus of the paper. Using a non-parametric methodology it is concluded that we cannot reject the presence of a significant degree of persistence in aggregate and disaggregate consumption in the three countries. These results are imperative from a policy point of view. Persistence in consumption does exist and cannot be ignored, whether the goal is to stabilize the level of output via consumption or to boost output via long-lasting increases in consumption. Given that cultural differences are not easily changed, a possible instrument is the interest rate.

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