SHERP

Do Consumption and Income Have a Long Run Relationship?

Cited 0 time in webofscience Cited 0 time in scopus
Authors
Kim, JaeYoung
Issue Date
2004
Publisher
Seoul Journal of Economics
Citation
Seoul Journal of Economics 17 (No. 4 2004): 547-561
Keywords
Consumption income relation; Cointegration; Short-run Nonstationarity
Abstract
This paper provides some new empirical evidence on the consumption-income relation which is one of the most thoroughly studied subjects in economics. According to the recent literature in economics the two variables should be co integrated for many theoretical results in economics, such as the permanent income hypothesis, to be meaningful. Our initial empirical results, however, show that cointegration between income and consumption is not well confirmed for U.S. quarterly data for extended postwar periods. This is an important problem that has to be addressed in the literature. In this paper we conjecture that failure of confirming cointegration for the consumption-income relation is due to nonstationarity fluctuations in some relatively short period(s) although the relation prevails in the majority of data period. Our empirical result confirms our conjecture. Two periods of "short-run" nonstationarity are identified for an extended postwar era of the U.S. economy: One is the Volker era in the early 1980's and the other consists of the recent years of unusually low interest rate. Our result has important implication for empirical analysis in economics where consumption and income variables are involved.
ISSN
1225-0279
Language
English
URI
http://hdl.handle.net/10371/1324
Files in This Item:
Appears in Collections:
College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.17(4) (Winter 2004)
  • mendeley

Items in S-Space are protected by copyright, with all rights reserved, unless otherwise indicated.

Browse