TEST OF THE ABSOLUTE INCOME HYPOTHESIS IN USA AND EUROPE

Yıl 2011, Cilt: 20 Sayı: 2, 299 - 316, 01.06.2011

Research Assistant Emrah Arıoğlu Emrah Arıoğlu Research Assistant Koray Tuan Koray Tuan

Öz

In this study the relationship between consumption and income is investigated from the Absolute Income Hypothesis perspective by using the Engle and Granger methodology with an extension to their sample group including Austria Belgium Denmark Finland Germany Italy and UK as well as USA The evidences suggest that both consumption and income series for all the countries have unit roots The results also suggest that while the residuals from the long run relation estimation regression of consumption and income for Austria Belgium Finland and Germany have unit roots the residuals for Denmark Italy UK and USA do not have unit roots suggesting that for the later group of countries consumption and income series are co integrated Lastly the coefficients derived by estimating the error correction model for Italy UK and USA are in accordance with the expected signs suggesting that consumption adjusts in the short run to its long run equilibrium value Key Words: Consumption Income Absolute Income Hypothesis Cointegration

Anahtar Kelimeler

Consumption, Income, Absolute Income Hypothesis, Cointegration

TEST OF THE ABSOLUTE INCOME HYPOTHESIS IN USA AND EUROPE

Öz

.

Anahtar Kelimeler

xx

Kaynakça

• Davidson, J. E. H., Hendry D. F., Srba F., and Yeo S. (1978), „Econometric Modeling of the Aggregate Time-series Relationship Between Consumer's Expenditure and Income in the United Kingdom‟, Economic Journal, Vol. 88, pp. 661-692.
• Davis, T. E. (1952), „The Consumption Function as a Tool for Prediction‟, The Review of Economics and Statistics, Vol. 34, pp. 270–277.
• Dreger, C. and Kosfeld, R. (2003),‟ Consumption and Income: Panel Econometric Evidence for West Germany‟, Applied Economics Quarterly, Vol. 1, pp. 75-88.
• Dreger, C. and Reimers, H. (2006), „Consumption and disposable income in the EU countries: the role of wealth effects‟, Empirica,Vol. 33(4), pp. 245-254.
• Duesenberry, J. (1948), „Income-Consumption Relation and Their Implications‟, Halt, Rinehard and Winston Inc.
• Engle, R. F. and Granger, C. (1987), „Co-Integrated and Error Correction: Representation, Estimation and Testing‟, Econometrica, Vol.55, pp.251–276.
• Fernandez-Corugedo, E. (2004), „Consumption Theory‟, Handbooks in Central Banking, No. 23, Centre for Central Banking Studies, Bank of England, London.
• Friedman, M. (1957), „A Theory of the Consumption Function‟, Princeton University Press.
• Gil-Alana, L. A. (2003), „Testing of Fractional Cointegration in Macroeconomic Time Series‟, Oxford Bulletin of Economics and Statistics, Vol. 65, 0305-9049.
• Granger, C.W.J., (1969), „Investigating Causal Relations by Econometric Models And Cross-Spectral Methods‟, Econometrica, Vol. 37 (3), pp. 424–438.
• Hall, R. E. (1978), „Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence‟, The Journal of Political Economy, Vol. 86, pp. 971- 987.
• Han, L. and Thury, G. (1997), „Testing for Seasonal Integration and Cointegration: The Austrian Consumption Income Relationship‟, Empirical Economics, Vol. 22, pp. 331- 344.
• Hualde, J. and Robinson, P. M. (2002), „Root-n-Consistent Estimation of Weak Fractional Cointegration‟, Faculty Working Papers 08/02, School of Economics and Business Administration, University of Navarra.
• Keynes, J. M. (1936), „The General Theory of Employment, Interest and Money‟, Macmillan Co.
• Kuznets, S. (1946), „National Product Since 1869‟, National Bureau of Economic Research.
• Lettau, M. and Ludvigson, S. (2001), „Consumption, Aggregate Wealth, and Expected Stock Returns‟, The Journal of Financa, Vol. LVI, pp. 815-849.
• Mankiw, N. G. (2002), „Macroeconomics‟, Worth Publishers.
• Modigliani, F. (1986), „Life Cycle, Individual Thrift And The Wealth Of Nations‟, American Economic Review, Vol. 76, pp. 296–313.
• Muellbauer, J. N. and Lattimore, R. (1999), „The Consumption Function: A Theoretical and Empirical Overview‟, Handbook of Applied Econometrics Volume I: Macroeconomics.
• Pehlivan, G. and Utkulu, U. (2007), “Turkey‟s Consumption Function: Fractional ECM Evidence‟, Akdeniz University Journal of Social Sciences, Vol. 14, pp. 39-65
• Rudd, J. and Whelan, K. (2006), „Empirical Proxies for the Consumption-Wealth Ratio‟, Review of Economic Dynamics, Vol. 9(1), pp. 34-51.
• Robinson, P. M. and Marinucci, D. (2001), „Semiparametric Fractional Cointegration Analysis‟, Journal of Econometrics, Vol. 105, pp. 225–247.
• Sachs, J. D. and Larrain, F. B. (1993), „Macroeconomics In The Global Economy‟, Prentice-Hall.
• Slacalek, J. (2005), „International Evidence On Cointegration Between Consumption, Income, And Wealth‟, Manuscript, Johns Hopkins University.