Title: Modelling consumption: permanent-income or rule-of-thumb behaviour?
Abstract: A number of authors have recently estimated the percentage of aggregate consumption accounted for by consumers who simply consume their current income in each period instead of behaving according to the permanent-income-rational-expectations hypothesis. The magnitude of this percentage has important policy implications. The existing models, however, incorporate approximations that may destroy the consistency of its estimates. The paper considers a model that does not share this problem. Using Greek annual aggregate data, 1960–1993, the model produces estimates of this percentage that are lower than those produced by the existing models. Utility-loss calculations suggest that the differences may be important.
Publication Year: 1999
Publication Date: 1999-04-01
Language: en
Type: article
Indexed In: ['crossref']
Access and Citation
Cited By Count: 13
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