Testing for structural break in aggregated consumption function of Russian households

2021 ◽  
pp. 91-106
Author(s):  
A. V. Polbin ◽  
A. A. Skrobotov
Keyword(s):  
Structural Break ◽  
Permanent Income ◽  
Regression Equation ◽  
Consumption Function ◽  
Adaptive Expectations ◽  
Econometric Estimation ◽  
Russian Economy

The paper considers a simple aggregated consumption function for Russian economy in which households consume a constant fraction of a permanent income. The value of this fraction is estimated by households within the framework of the adaptive expectations process based on the dynamics of GDP at constant consumption prices. Testing for a structural break at an unknown date in the parameter of the propensity to consume is performed. The results of econometric estimation, taking into account the presence of an endogeneity in the regression equation, demonstrate that after 2014 there was a structural break, as a result of which the parameter of the propensity to consume of permanent GDP decreased by 6.5—9.2%.

scholarly journals OS MICROFUNDAMENTOS DO CONSUMO: DE KEYNES ATÉ A VERSÃO MODERNA DA TEORIA DA RENDA PERMANENTE

2003 ◽  
Vol 29 ◽  
Author(s):  
Flavia Dias Rangel Oreiro
Keyword(s):  
Life Cycle ◽  
Rational Expectations ◽  
Function Theory ◽  
Permanent Income ◽  
Permanent Income Hypothesis ◽  
Consumption Function ◽  
John Maynard Keynes ◽  
Aggregate Consumption ◽  
Milton Friedman ◽  
Consumption Decision

Este artigo pretende analisar a evolução recente das teorias de consumo, enfatizando os micro-fundamentos do consumo, desde Keynes (1936) até a versão moderna da teoria da renda permanente de Hall- Flavin (1978-1981), bem como inserir o comportamento do consumidor numa ótica intertemporal. Nesse contexto, são discutidas: a teoria de consumo de John Maynard Keynes (1936); os fatos estilizados de Simon Kuznets (1940); a contribuição de Irving Fisher à teoria de consumo ao propor o modelo intertemporal básico de comportamento do consumidor; a teoria da renda permanente de Milton Friedman (1957) e a teoria do ciclo da vida de Franco Modigliani (1963), as quais se baseiam no arcabouço teórico de Fisher para explicar o “enigma do consumo”; e finalmente, a chamada “versão moderna da teoria da renda permanente” de Hall - Flavin (1978-81), que aplica o método de expectativas racionais aos modelos ciclo-da vida/ renda permanente. Abstract The objective of the present article is to analyze the recent evolution of the theories of the consumption function, with a special emphasis over the micro foundations of the consumption decision, since Keynes (1936) until the modern version of the permanent income hypothesis of Hall and Flavin (1978-1981). In this setting we will discuss the following issues: the consumption function theory of John Maynard Keynes, the stylized facts of Kusnets, the Irving Fisher contribution to the consumption function theory by his proposal of an intertemporal framework to analyze consumer behavior; Milton Friedman´s theory of permanent income and Modigliani´s life-cycle hypothesis. All these theories are based upon Irving Fisher framework to explain the “consumption enigma”. Finally we will analyze the Hall-Flavin version of the permanent income hypothesis, which applies the rational expectations method to the models of aggregate consumption based on the life-cycle/permanent income hypothesis.

scholarly journals The Impact of Covid-19 on The Effect Multiplier on The Household Consumption Function in Jakarta

2021 ◽  
Vol 3 (2) ◽  
Author(s):  
Fahrul Riza ◽  
Michael Christianto Leonardo
Keyword(s):  
National Income ◽  
Household Consumption ◽  
Permanent Income ◽  
Annual Data ◽  
Consumption Expenditure ◽  
Permanent Income Hypothesis ◽  
Consumption Function ◽  
Short Term ◽  
Consumption Expenditures ◽  
The Impact

The purpose of this study is to examine the effect of a decrease in aggregate income, due to activity restrictions during the Covid-19 pandemic, on household consumption expenditure in Jakarta. The research model is based on the Absolute and Permanent income hypothesis, to see the long-term and short-term effects of changes in income on consumption expenditure. The research method is quantitative by using annual data on consumption expenditure and income at current prices for the period 2003 to 2020. The analysis model uses OLS and ECM regression. The results showed that income has a significant effect on the equation of the short-run and long-run consumption function. The short-term income crisis has an impact on the increase in the multiplier coefficient. In the short term there will also be an adjustment in consumption expenditures, according to what is postulated in the permanent income hypothesis. This indicates that in the short term expansionary fiscal policy is effective in increasing aggregate household consumption expenditure. Further research suggests adding the inflation variable as a proxy for economic conditions. Keywords: Absolute Income Hypothesis, Permanent Income Hypothesis, Household Consumption Expenditures, National Income, Multiplier.

scholarly journals China’s Consumption Function: An Empirical Test of Absolute and Permanent Income Hypothesis

2016 ◽  
Vol III (I) ◽  
pp. 90-97 ◽  
Author(s):  
Saima Liaqat ◽  
Khalid Khan ◽  
Po Bunnika
Keyword(s):  
Private Consumption ◽  
Research Study ◽  
Empirical Test ◽  
Permanent Income ◽  
Permanent Income Hypothesis ◽  
Consumption Function ◽  
Current Income ◽  
Yearly Data ◽  
Forward Looking

The study investigated the empirical rationale of Absolute and Permanent Income Hypothesis (AIH) & (PIH) for China by applying the yearly data from 1970-2016. The outcomes of the research study dismissed the validity of PIH, at the same time it reinforced the soundness of AIH in the country. The aftereffects of CMMl demonstrate that any change that occurs in expected income significantly affects the innovation in real private consumption. Moreover, the share of forward-looking households is genuinely lower than backward-looking households. Under the CMM the estimated value of (1- λ) for China is 0.25, which implies that by and large 25 percent of the households set their consumption base on permanent income, albeit the rest of the families take their consumption preferences are subject to current income, notwithstanding the outcomes of the study bring up a solid dismissal of PIH for China.

Permanent Income, Inflation Expectations and the Money Demand Function in Developing Countries

1982 ◽  
Vol 21 (4) ◽  
pp. 259-273 ◽  
Author(s):  
Ashfaque H. Khan
Keyword(s):  
Developing Countries ◽  
Money Demand ◽  
Demand Function ◽  
Permanent Income ◽  
Quadratic Loss ◽  
Inflation Expectations ◽  
Demand For Money ◽  
Money Demand Function ◽  
Adaptive Expectations ◽  
Expected Inflation

Using the Adaptive Expectations Model and the method of minimising quadratic loss function this paper explores the relevant scale and opportunity cost variables in the money demand function of six developing countries of Asia. It is found that substitution of permanent income for measured income and of expected inflation for actual inflation does not generally improve the estimates of money demand function. Furthermore, the demand for money is found to be sensitive to changes in interest rate for some countries.

scholarly journals An Empirical Evaluation of Consumption Behaviour in Oil Societies: The Case of Kuwait

1984 ◽  
Vol 23 (1) ◽  
pp. 81-94
Author(s):  
Sulayman S. Al-Qudsi
Keyword(s):  
Life Cycle ◽  
Empirical Evaluation ◽  
Empirical Work ◽  
Permanent Income ◽  
Data Sets ◽  
Consumption Function ◽  
Keynesian Model ◽  
Survey Results ◽  
Life Cycle Hypothesis ◽  
Income Model

Theories of consumption function have been tested for many developed and underdeveloped economies with grouped data sets. No empirical work has been done to confirm or disconfirm these theories in the oil-rich economies of the Middle East. This paper applies Kuwait's rich micro data of the 1972-73 budget survey results to the principal consumption models - the Keynesian Model, the Kaldor Hypothesis, the Friedman Permanent-Income Model and the Life-Cycle Hypothesis. The results of this empirical investigation disconfirm the validity of the strict version of the Permanent-income Hypothesis in favour of the Keynesian and the looser version of the Permanent-Income Hypotheses. The Kaldor model is not strictly applicable and the saving behaviour of Kuwaiti households seems to give support to the Life-Cycle Hypothesis.

TESTING THE PERMANENT-INCOME/LIFE-CYCLE HYPOTHESIS WITH AGGREGATE DATA

1998 ◽  
Vol 2 (3) ◽  
pp. 401-425 ◽  
Author(s):  
John J. Seater
Keyword(s):  
Life Cycle ◽  
Euler Equation ◽  
Aggregate Data ◽  
Permanent Income ◽  
Consumption Function ◽  
Aggregated Data ◽  
Aggregate Consumption ◽  
Life Cycle Hypothesis

The aggregate implications of the permanent-income/life-cycle hypothesis (PILCH) are derived rigorously. Virtually all empirical rejections of PILCH based on aggregated data are shown to result from misspecifications or from characteristics of aggregate data that have been overlooked. Valid aggregate tests are proposed. Those based on a properly formulated aggregate consumption function may be superior to those based on Euler-equation methods.

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