Habit persistence, non-separability between consumption and leisure, or rule-of thumb consumers: which accounts for the predictability of consumption growth?

Consumption growth is predictable, a basic violation of the permanent-income hypothesis. This paper examines three possible explanations: rule-of-thumb behavior, in which households allow consumption to track per-period income flows rather than permanent income; habit persistence; and non-separability in preferences over consumption and leisure. The data appear most consistent with non-separable preferences over consumption and leisure.

MoreLess

Year of publication:	2007
Authors:	Kiley, Michael T.
Institutions:	Federal Reserve Board (Board of Governors of the Federal Reserve System)
Subject:	Consumption (Economics) \| Consumer behavior

More details

Extent:	text/html application/pdf
Series:	Finance and Economics Discussion Series.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 2007-48
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005721203