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Modelling consumers' expenditure

Author

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  • Rossi, Nicola
  • Schiantarelli, Fabio

Abstract

The purpose of this paper is to model the dynamics of consumers' response to changes in the relevant variables. Wealth and inflation effects on aggregate consumption expenditure are investigated. Real capital losses (or gains) due to inflation are accounted for in providing a more appropriate definition of income in a situation of rising prices. Empirical results for Italy show that, once the dynamic structure of the model is carefully specified, consumption expenditure can be explained in terms of a limited number of variables (income and wealth). Some evidence is found, moreover, in favour of redefining income, while additional inflation effects appear to be not significant.

Suggested Citation

  • Rossi, Nicola & Schiantarelli, Fabio, 1982. "Modelling consumers' expenditure," European Economic Review, Elsevier, vol. 17(3), pages 371-391.
    • Handle: RePEc:eee:eecrev:v:17:y:1982:i:3:p:371-391
    DOI: 10.1016/S0014-2921(82)80070-6
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    References listed on IDEAS

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