THE PREDICTABILITY OF AGGREGATE CONSUMPTION GROWTH IN OECD COUNTRIES: A PANEL DATA ANALYSIS
Article first published online: 19 JUN 2013
Copyright © 2013 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Volume 29, Issue 3, pages 431–453, April/May 2014
How to Cite
Everaert, G. and Pozzi, L. (2014), THE PREDICTABILITY OF AGGREGATE CONSUMPTION GROWTH IN OECD COUNTRIES: A PANEL DATA ANALYSIS. J. Appl. Econ., 29: 431–453. doi: 10.1002/jae.2338
- Issue published online: 2 APR 2014
- Article first published online: 19 JUN 2013
- Manuscript Revised: 27 NOV 2012
- Manuscript Received: 26 OCT 2011
We examine aggregate consumption growth predictability. We derive a dynamic consumption equation which encompasses relevant predictability factors: habit formation, intertemporal substitution, current income consumption and non-separabilities between private consumption and both hours worked and government consumption. We estimate this equation for a panel of 15 OECD countries over the period 1972–2007, taking into account parameter heterogeneity, endogeneity and error cross-sectional dependence using a GMM version of the common correlated effects mean group estimator. Small-sample properties are demonstrated using Monte Carlo simulations. The estimation results support income growth as the only variable with significant predictive power for aggregate consumption growth. Copyright © 2013 John Wiley & Sons, Ltd.