An Investigation of the Long-run Properties of Aggregate Non-durable Consumers' Expenditure in the United Kingdom.

This paper estimates the effects of the modeling of nondurable consumption in the light of the five years of new data since the publication of the paper by J. E. H. Davidson et al. (1978) and the development of the new cointegration technique of R. F. Engle and C. W. J. Granger (1987). Existing models are found to be inadequate on two grounds, they fail parameter stability tests and they do not contain a suitable equilibrium specification. The paper uses the cointegration approach to search for an encompassing model that is both stable and cointegrates. The main finding is that the analysis must be extended to allow for differential income effects caused by changing higher rate income tax bands. Copyright 1989 by Royal Economic Society.