Consumption, Saving and Rational Expectations: Some Further Evidence for the U.K.
This paper examines implications of the rational expectations-permanent income framework for (quasi-) savings using U.K. data. The residual from a cointegrating regression between income and consumption provides the (quasi-) savings series that is used in conjunction with differenced income in a bivariate vector autoregression, with associated restrictions and exclusion tests. A further implication is that savings should Granger-cause labor income changes. Incomes and consumption are found to be cointegrated in levels as a robust result, and the bivariate system performs well. However, savings Granger-cause labor income changes with a perverse positive sign and exclusion restrictions fail. Copyright 1989 by Royal Economic Society.
Year of publication: |
1989
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Authors: | MacDonald, Ronald ; Speight, Alan E H |
Published in: |
Economic Journal. - Royal Economic Society - RES, ISSN 1468-0297. - Vol. 99.1989, 394, p. 83-91
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Publisher: |
Royal Economic Society - RES |
Saved in:
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