Casadio, Paolo and Paradiso, Antonio (2010): Inflation and consumption in a long term perspective with level shift.
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This article examines the existence and stability of the consumption function in the United States of America (US) economy during a sample period, beginning in the 1950s. In order to obtain a stable long run relationship, we have introduced two innovative elements into the analysis of the life-cycle of the consumption function with wealth effects: 1) a shift level break in the cointegrating relationship, and 2) using inflation as an additional explanatory variable. By implementing a well structured estimation strategy we found that, after taking the shift level break into account, a cointegration including inflation exists and is more stable for the critical sub-samples than traditional consumption function models.
|Item Type:||MPRA Paper|
|Original Title:||Inflation and consumption in a long term perspective with level shift|
|Keywords:||Consumption, Cointegration, Inflation, Shift level break|
|Subjects:||C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C20 - General
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E21 - Consumption; Saving; Wealth
|Depositing User:||Antonio Paradiso|
|Date Deposited:||17. Jan 2011 14:31|
|Last Modified:||11. Feb 2013 17:14|
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