Arbeitspapier
UK Consumers' Habits
We follow Fuhrer (2000) in estimating via Maximum Likelihood a log-linear consumption function on UK data. In doing so we consider various habit formation assumptions. We show that a model of purely "external" habits as in Fuhrer (2000) fits the UK data remarkably well, and possibly in a superior way than US data where, according to our estimates, consumers' habits look more "internal" in that they appear indexed to past average consumption of only a subset of (peer) consumers in the economy, rather than total past per capita consumption. We also find that for about one seventh of UK consumers, current consumption equals current income_a strong violation of the permanent income hypothesis. Embedded in a sticky price-sticky inflation open-economy monetary model, the model that we estimate helps mimic the hump-shaped response of the output gap to income and interest rate shocks observed in the UK. Estimates of output Euler equations for the UK using a similar method agree with our general results. The consumption and output models that we estimate forecast significantly better than unrestricted open-economy VARs.
- Sprache
-
Englisch
- Erschienen in
-
Series: External MPC Unit Discussion Paper ; No. 13
- Klassifikation
-
Wirtschaft
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Banerjee, Ryan
Batini, Nicoletta
- Ereignis
-
Veröffentlichung
- (wer)
-
Bank of England, External Monetary Policy Committee Unit
- (wo)
-
London
- (wann)
-
2003
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:41 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Banerjee, Ryan
- Batini, Nicoletta
- Bank of England, External Monetary Policy Committee Unit
Entstanden
- 2003
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