Template-Type: ReDIF-Paper 1.0
Title: Modelling Aggregate Consumption Growth with
Time-Varying Parameters
Author-Name: Jürgen Arns
Author-Name: Kaushik Bhattacharya
Author-Email: 
Classification-JEL: C4, C5, D1
Keywords: Aggregation, Consumption Function, Average Derivative
Abstract: Using the Family Expenditure Survey (FES) data for the United
	Kingdom (UK), the paper specifies and estimates a ’complete’ Hilden-
	brand Kneip (HK) model of consumption, extending earlier efforts
	that were ’partial’ in nature. As the estimated parameters in the
	’partial’ HK model are time varying, the paper provides empirical evi-
	dence that their movements over time reflect a near unit root process.
	To estimate the ’complete’ HK model, the paper specifies a simple
	OLS model of the ’remainder term’ in the ’partial’ HK model. The
	remainder term in the partial HK model, which as per theory should
	be influenced by unobservable variables like expectation formation of
	households, is found to be affected by housing prices. The complete
	model is found to explain movements in consumption better than the
	partial model. Results based on bootstrap suggest that given the
	sampling error in the FES data, the overall fit of the model should be
	considered as good.
Note: 
Length: 36
Creation-Date: 2005-06	
Revision-Date: 
File-URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse15_2005.pdf
File-Format: application/pdf
Handle: RePEc:bon:bonedp:bgse15_2005